*SECTION 12(b)(i), (ii) AND (iii) AND SECTION 12(c) (i), (ii) AND (iii), HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THESE SECTIONS APPEAR ON PAGES
60 AND 61 OF THE COMPLETE DOCUMENT.
LEASE AGREEMENT
Lease Agreement, dated as of June 9, 1999 (as the same may be amended,
restated, modified or supplemented from time to time, "this Lease"), between LIC
Funding, Limited Partnership, a Delaware limited partnership, as lessor (the
"Lessor"), and KeySpan-Ravenswood, Inc., a New York corporation, as lessee (the
"Lessee").
SECTION 1. DEFINED TERMS.
Unless the context otherwise requires, each term defined in this Section
1 shall, when used in this Lease, have the meaning indicated:
"Accrued Default Obligations" has the meaning set forth in Section 19
hereof.
"Acquisition Certificate" means the written certification in the form of
Exhibit D hereto of the Lessee to be delivered to the Lessor and the Related
Assignee in connection with any requested acquisition of the Facility and any
other Parcel of Property or Unit of Equipment pursuant to paragraph (b) of
Section 5 hereof, certifying with respect to the Facility or such Property or
Equipment that (i) the insurance then carried on the Facility or such Property
or Equipment complies with the terms of this Lease, (ii) all past and current
taxes and assessments applicable to the Facility or such Property or Equipment
have been paid in full, (iii) all utility services, manuals, equipment
inspection reports, maintenance records, easements, rights of way, facilities,
Intellectual Property Rights and permits, licenses and approvals which are
necessary for operation and occupancy of the Facility or such Property or
Equipment have been obtained and are in full force and effect, (iv) there are no
Liens on the Facility or such Property or Equipment that are not Permitted
Liens, (v) all representations and warranties made in this Lease and in
connection with the acquisition of the Facility or such Property or Equipment
are and remain true and correct on and as of the date of the acquisition of the
Facility or such Property or Equipment, (vi) no Event of Default or Potential
Default has occurred or will occur and be continuing on the date of the
acquisition of the Facility or such Property or Equipment, and (vii) the
Facility or such Property or Equipment is capable of being operated and
maintained in compliance with all Legal Requirements.
"Acquisition Cost" means, (i) with respect to any Unit of Equipment, an
amount equal to the sum of (a) the vendor's invoice price therefor, including
any progress payments, costs of labor, delivery or installation, sales, use,
excise or similar taxes and any other charges included in such invoice, after
deduction for any refundable discounts or credits actually used by the Lessor,
(b) similar amounts paid or payable with respect to such Unit to parties other
than the vendor of such Unit, (c) similar costs incurred with respect to such
Unit by the Lessee, and (d) legal, printing, reproduction, closing and other
normally capitalizable administrative fees and expenses paid by the Lessee and
approved by the Lessor; and (ii) with respect to the Facility or any other
Parcel of Property, an amount equal to the amounts included in (i)(d) above
which are applicable to the Facility or such Parcel plus (a) the seller's
contract price therefor or, in the absence of a seller's contract price, the
appraised value thereof, (b) closing costs, including, without limitation, title
insurance premiums, survey and survey inspection charges, recording and filing
fees, title closer fees, vendee's attorneys' fees and brokerage commissions, (c)
other costs related to the acquisition, including, without limitation,
appraisal, architectural, engineering, soil analysis, environmental analysis and
market analysis fees, and (d) any amounts paid in addition to, and not as a
credit against the contract price, including, without limitation, payments made
in satisfaction of prior liens, and payment of any transfer, transfer gains or
similar taxes imposed in respect of the conveyance, transfer or sale of such
Property. The Acquisition Cost of the Facility or any other Property or
Equipment may be reduced from time to time pursuant to paragraph (b) of Section
13 or paragraph (b) of Section 16 hereof.
"Additional Property" means such equipment and tangible personal
property as is located adjacent to (but not at) the Facility and owned by the
Lessee or its Affiliates (which may not be located on land that is owned by the
Lessee) and all related appliances, appurtenances, accessions, furnishings,
piping, conduits, transmission lines, materials, parts and other tangible
personal property of any type associated with and relating thereto (including
all replacements of such appliances, appurtenances, accessions, furnishings,
materials, parts and other personal property), which is required in connection
with the operation of the Facility or any Turbine Unit. Additional Property
shall be comprised only of the equipment and personal property described in
Exhibit I hereto, together with all replacements thereof. Neither the cost of
acquisition, installation and construction nor the value of the Additional
Property shall be included in determining Acquisition Cost or Basic Rent; and
the acquisition, installation, construction, ownership, operation and
maintenance by the Lessee of the Additional Property, and the inclusion of the
definition of Additional Property in this Lease, shall not change or enlarge any
other definition in this Lease, including, without limitation, the definitions
of Acquisition Cost, Basic Rent, Capacity, Facility, Facility Site and Facility
Assets.
"Additional Rent" has the meaning set forth in paragraph (d) of Section 7
hereof.
"Adjustment Factor" has the meaning set forth in paragraph (b)(i) of
Section 13 hereof.
"Affiliate" of any Person means any other Person controlling, controlled
by or under direct or indirect common control with such Person. For the purposes
of this definition, "control," when used with respect to any specified Person,
means the power to direct the management and policies of such Person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Air Permits" means the City of New York, the State of New York and U.S.
Environmental Protection Agency permits or other Governmental Actions relating
to the emission of air Contaminants required for the operation of the Facility
or a Turbine Unit in order for the Facility or such Turbine Unit to operate
under the Environmental Requirements.
"Appraisal Procedure" means the following procedure whereby an
independent appraiser shall be appointed by the Lessor and the Lessee, with the
consent of the Related Assignee, to determine the amount of wear and tear in
excess of that attributable to normal use of the Facility or any other Property
or Equipment to which the provisions of (b)(iii) or (c)(iii)
apply. If no such appraiser is appointed by the mutual agreement of the Lessor
and the Lessee within ten (10) days of the written request of either the Lessor
or the Lessee that an appraiser be appointed, the Lessor and the Lessee shall
each appoint an independent appraiser within fifteen (15) days thereafter, and
the two appraisers so appointed shall appoint a third independent appraiser.
Each appraiser appointed pursuant to the foregoing procedure shall, within ten
(10) days after appointment of the last appraiser, independently determine the
amount of wear and tear in excess of that attributable to normal use. If the
Lessor or the Lessee shall fail to appoint an independent appraiser within the
above-mentioned fifteen (15) day period, the appraiser appointed by the other
party shall determine such amount. If a single appraiser is appointed, such
appraiser's determination shall be final. If three appraisers are appointed, the
amounts determined by the three appraisers shall be averaged, the amount which
differs the most from such average shall be excluded, the remaining two amounts
shall be averaged and such average shall be final. The expenses of all
appraisers shall be paid by the Lessee. Each appraiser appointed pursuant to an
"Appraisal Procedure" shall be a qualified engineering firm and, if the
Appraisal Procedure shall relate to the Facility or any Turbine Unit, shall have
experience in appraising electric generating facilities.
"Appraiser" means Arthur Andersen LLP.
"Assignment" means each assignment agreement referred to in Section 21
hereof, between the Lessor and a third party, pursuant to which the Lessor
assigns certain of its rights under this Lease to such third party, as the same
may be amended, restated, modified or supplemented from time to time.
"Basic Rent" means, with respect to the Facility or any other Parcel of
Property or Unit of Equipment, as the case may be:
(a) At each Basic Rent Payment Date during the Initial Term and the
Extended Term, and in respect of the semi-annual period ending on June 20th or
December 20th in which such Basic Rent Payment Date occurs, the sum of (X) plus
(Y) plus (Z), where (X), (Y) and (Z) have the following meanings:
(X) (i) the Equity Capital for the Facility or such other
Parcel of Property or Unit of Equipment, as the case may
be, before payment of the applicable Basic Rent for such
semi-annual period, multiplied by
(ii) a fraction having a numerator equal to 180 and a
denominator of 360, multiplied by
(iii)the decimal equivalent of a percentage equal to the
LIBOR Rate plus 2%.
(Y) (i) the Debt Capital for the Facility or such other Parcel
of Property or Unit of Equipment, as the case may be,
before payment of the applicable Basic Rent for such
semi-annual period, multiplied by
(ii) a fraction having a numerator equal to 180 and a
denominator of 360, multiplied by
(iii)the decimal equivalent of a percentage equal to the
Semi-Annual Cost of Debt for the Facility or such other
Parcel of Property or Unit of Equipment, as the case may
be.
(Z) an amount equal to the Management Fee.
(b) For any partial semi-annual period during the Initial Term and any
Extended Term, an amount equal to the sum of (X) plus (Y) plus (Z), where (X),
(Y) and (Z) have the following meanings:
(X) (i) the Equity Capital for the Facility or such other Parcel of
Property or Unit of Equipment, as the case may be, multiplied by
(ii) a fraction having a numerator equal to the number of days
the Facility or such other Parcel or Unit is under lease
during such partial semi-annual period (provided that, all
full calendar months during such partial semi-annual
period shall be computed on the basis of a 30-day month)
and a denominator of 360, multiplied by
(iii)the applicable decimal referred to in paragraph
(a)(X)(iii) above, provided that, if the Effective Date
for the Facility or such other Parcel or Unit falls on or
after the Lease Rate Date during such partial semi-annual
period such decimal shall be the decimal determined as of
the next succeeding Lease Rate Date.
(Y) (i) the Debt Capital for the Facility or such other Parcel
of Property or Unit of Equipment, as the case may be,
multiplied by
(ii) a fraction having a numerator equal to the number of days
the Facility or such other Parcel or Unit is under lease
during such partial semi-annual period (provided that, all
full calendar months during such partial semi-annual
period shall be computed on the basis of a 30-day month)
and a denominator of 360, multiplied by
(iii)the decimal equivalent of a percentage equal to the
Semi-Annual Cost of Debt for the Facility or such other
Parcel of Property or Unit of Equipment, as the case may
be; provided that, if the Effective Date for the Facility
or such other Parcel or Unit falls on or after the Lease
Rate Date during such partial semi-annual period, such
Semi-Annual Cost of Debt shall be determined as of the
next succeeding Lease Rate Date.
(Z) an amount equal to the Management Fee.
(c) For each semi-annual period during the Renewal Term, if any, an
amount equal to the fair market rental value thereof, determined as provided in
paragraph (c) of Section 13 hereof.
"Basic Rent Payment Date" means June 20th and December 20th during the
Initial Term and any Extended Term and Renewal Term, commencing on December 20,
1999, or, if such day is not a Business Day, the next succeeding Business Day.
"Brooklyn Union East" means KeySpan Gas East Corporation (d/b/a Brooklyn
Union of Long Island), a New York corporation and a subsidiary of the Guarantor.
"Brooklyn Union Gas" means The Brooklyn Union Gas Company, a New York
corporation and a subsidiary of the Guarantor.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in the City of New York are authorized by law to
close.
"Capacity" means (i) with respect to the Facility, the rated capacity of
the Facility (at normal operating conditions) to generate electricity, which is
initially expected to be approximately 1,742 megawatts, and (ii) with respect to
any other Turbine Unit, the rated capacity of such Turbine Unit (at normal
operating conditions) to generate electricity.
"Cash Proceeds" has the meaning set forth in paragraph (a) of Section 12
hereof.
"CERCLA" has the meaning set forth in paragraph (u)(iii) of Section 2(i)
hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder from time to time.
"Collateral Indenture" means the Indenture of Trust, Security Agreement
and Assignment dated as of the date hereof, entered into by the Lessor and the
Collateral Trustee, pursuant to which the Lessor has granted a security interest
in certain collateral of the Lessor to the Collateral Trustee, as the same may
be amended, restated, modified or supplemented from time to time in accordance
with the terms thereof.
"Collateral Trustee" means The Bank of New York, in its capacity as
trustee for the holders of the Notes under the Collateral Indenture, and its
successors.
"Computation Period" has the meaning set forth in the definition of
Semi-Annual Cost of Debt in this Section 1.
"Con Edison" means Consolidated Edison Company of New York, Inc., a New
York corporation.
"Consent" means each consent of the Lessee to an Assignment, pursuant to
which the Lessee consents to the terms of such Assignment insofar as they relate
to this Lease and the Facility or any other Parcel of Property or Unit of
Equipment, as the same may be amended, restated, modified or supplemented from
time to time.
"Consolidated Net Worth" means the total consolidated stockholders'
equity, capital stock, preferred stock and minority interests of the Guarantor
and its subsidiaries, determined in accordance with GAAP.
"Contaminant" means any pollutant, hazardous substance, radioactive
substance, toxic substance, hazardous waste, medical waste, radioactive waste,
special waste, industrial waste, petroleum or petroleum-derived substance or
waste, asbestos, PCBs or any hazardous or toxic constituent thereof or any
substance regulated or identified under Environmental Requirements as
potentially harmful to human health, natural resources or the environment.
"Core Gas Distribution Business" means the distribution and sale at
retail to customers of natural gas in the New York City boroughs of Brooklyn,
Queens and Staten Island and the Long Island counties of Nassau and Suffolk, as
such business is conducted by Brooklyn Union Gas and Brooklyn Union East on the
date hereof and more fully described in the Private Placement Memorandum.
"Debt Capital" means, with respect to the Facility or any other Parcel
of Property or Unit of Equipment, as the case may be, at the time of
determination, an amount equal to the Acquisition Cost thereof minus the Equity
Capital in respect thereof.
"Debt Yield-Maintenance Premium" means an amount equal to the amount of
Make-Whole Premium (as defined in the Note Purchase Agreement) payable by the
Lessor (net of any amounts payable to the Lessor under the Derivative Option)
pursuant to the terms of the Note Purchase Agreement.
"Derivative Option" means the Option, dated as of the date hereof,
between the Lessor and Merrill Lynch Capital Services, Inc., as the same may be
amended, restated, modified, or supplemented from time to time.
"Easements" means the easements and licenses granted to the Lessor by
the Lessee pursuant to the Ground Lease, as such easements and licenses may be
amended, restated, modified or supplemented from time to time in accordance with
the terms hereof.
"Effective Date" means, with respect to the Facility and any other
Parcel of Property or Unit of Equipment, the date on which the Facility or such
Parcel or Unit becomes subject to this Lease, as evidenced by execution by the
Lessor of a Unit Leasing Record with respect to the Facility or such Parcel or
Unit.
"Engineering Report" means the 1998 assessments prepared by Stone &
Webster with respect to the Facility.
"Environmental Approvals" means all Governmental Actions, Air Permits
and other authorizations required under applicable Environmental Requirements.
"Environmental Consultant" means Pilko & Associates, Inc., or such other
environmental consulting firm qualified to evaluate environmental risks
associated with the Facility, the Additional Property or any other Parcel of
Property or Unit of Equipment, as selected by the Lessee and reasonably
satisfactory in all respects to the Lessor and the Related Assignee.
"Environmental Damages" means all claims, judgments, damages (including
without limitation punitive and consequential damages), losses, penalties,
fines, interest, fees, liabilities (including without limitation strict
liability), taxes, obligations, encumbrances, liens, costs and expenses
(including, without limitation, costs and expenses of investigation and defense
of any claim relating to or in any way arising out of the Facility, the
Additional Property or any other Parcel of Property or Unit of Equipment,
whether or not such claim is ultimately defeated, and of any good faith
settlement or judgment), of whatever kind or nature, contingent or otherwise,
matured or unmatured, foreseeable or unforeseeable, including, without
limitation, reasonable attorneys' fees and disbursements and consultants' fees,
any of which are asserted, imposed or incurred at any time pursuant to
Environmental Requirements, including, without limitation:
(i) Damages arising from the existence of Contaminants at any
location or compliance or noncompliance with, or violation of, Environmental
Requirements;
(ii) Damages for personal injury or threatened personal injury
(including without limitation sickness, disease or death), or injury or
threatened injury to property or natural resources, foreseeable or
unforeseeable, including, without limitation, the cost of demolition and
rebuilding of any improvements on real property;
(iii) Reasonable fees incurred for the services of attorneys,
consultants, contractors, doctors, experts, laboratories and all other
reasonable costs incurred in connection with any damages as described in
subparagraph (i) of this definition, and the investigation or remediation of
Contaminants or the suspected presence of Contaminants or the violation or
threatened violation of Environmental Requirements, including, but not limited
to, the preparation of any feasibility studies or reports or the performance of
any investigation, cleanup, treatment, remediation, removal, response,
abatement, containment, closure, storage, disposal, transport, restoration or
monitoring work required by any federal, state, local or foreign governmental
agency or political subdivision, or otherwise expended in connection with such
conditions, and including, without limitation, any reasonable attorneys' fees,
costs and expenses incurred in enforcing this Lease or collecting any sums due
hereunder; and
(iv) Liability to any third Person or Governmental Authority to
indemnify such Person or Governmental Authority for costs expended in connection
with the items referenced in subparagraphs (i), (ii) and (iii) of this
definition.
"Environmental Event" has the meaning set forth in paragraph (ii)(g) of
Section 2 hereof.
"Environmental Lien" means a Lien in favor of any Governmental Authority
for any (a) liability under any Environmental Requirement, or (b) damages
arising from, or costs incurred by, such Governmental Authority in response to a
Release or threatened Release of a Contaminant into the environment.
"Environmental Matters" means any matter, fact or situation relating to
or arising from (a) any violation or alleged violation of, or compliance or
noncompliance with, an Environmental Requirement, (b) any Release or threatened
Release of any Contaminant on, under or from the Facility or any other Property
or Equipment or the presence of any Contaminant which has come to be located on,
from or under the Facility, the Additional Property or any other Property or
Equipment from another location, or (c) any injury to human health or safety or
the environment by reason of the matters described in clauses (a) and (b) above.
"Environmental Report" means an environmental report issued to the
Lessor and the Related Assignee and is otherwise satisfactory to the Lessor and
the Related Assignee in all respects, prepared by the Environmental Consultant.
"Environmental Requirements" means all applicable federal, state, local
and foreign laws (including duties under the common law), statutes, codes,
ordinances, rules, regulations, directives, Governmental Actions, authorizations
or orders relating to the environment, natural resources or human health,
including, but not limited to those relating to (a) the use, handling or Release
of any Contaminant or (b) worker health. Environmental Requirements shall
include all Environmental Requirements now or hereafter enacted, made or issued,
whether or not presently contemplated; provided, that for purposes of paragraph
(i)(u) of Section 2 hereof, Environmental Requirements shall include only those
Environmental Requirements enacted, made or issued as of the time such
representations and warranties shall be made or deemed made.
"Equity Capital" means, with respect to the Facility or any other Parcel
of Property or Unit of Equipment, as the case may be, at the time of
determination, the aggregate amount of cash contributions to the Lessor's
capitalization made by the general partner and the limited partners of the
Lessor used to pay a part of the Acquisition Cost thereof, plus any
undistributed return on such cash contributions, less the aggregate amount of
any returns of such cash contributions made to such partners at such time;
provided that, for purposes of the definition of "Basic Rent" and "Debt Capital"
in this Lease, the reference therein to "Equity Capital" shall not include any
undistributed return on such cash contributions.
"Equipment" means personal property of any type leased or to be leased
hereunder and, when leased, evidenced by Unit Leasing Records, and all related
appliances, appurtenances, accessions, furnishings, materials and parts leased
or to be leased by the Lessor to the Lessee as provided herein and including all
replacements and subsequent replacements of such related appliances,
appurtenances, accessions, furnishings, materials and parts. "Unit", when
referring to the personal property leased under this Lease, means a particular
item of Equipment, as the context may require. This definition of "Equipment"
does not include any Additional Property.
"Event of Default" has the meaning set forth in Section 18 hereof.
"Event of Lease Termination" has the meaning set forth in Section 14
hereof.
"Event of Loss" means, with respect to the Facility or any other Parcel
of Property or Unit of Equipment, any of the following events: (a) loss of all
or a substantial portion of the Facility or such other Parcel or Unit, as the
case may be, or the use thereof due to destruction, damage beyond economical
repair or other damage which renders the Facility or such Parcel or Unit, as the
case may be, permanently unfit for the use contemplated by this Lease or any
other Operative Document on a commercially feasible basis; (b) any event which
results in an insurance settlement with respect to the Facility or such other
Parcel or Unit, as the case may be, on the basis of a total loss or constructive
total loss; and (c) the condemnation or taking or requisition of title or use
for an indefinite period or a period in excess of one hundred and eighty (180)
days by any Governmental Authority which constitutes the taking of all or a
substantial portion of the Facility or such other Parcel or Unit such that the
remainder is not sufficient to permit operation of the Facility or such Parcel
or Unit on a commercially feasible basis. A loss of a "substantial portion" of
the Facility or any other Parcel or Unit shall be deemed to occur if, in the
reasonable judgment of the Lessor and the Related Assignee, after such event,
(i) the Lessee will not be able to materially perform its obligations under this
Lease with respect to the Facility or such other Parcel or Unit, as the case may
be, or (ii) a material diminution in the value, utility or remaining economic
useful life of the Facility or such Parcel or Unit, as the case may be, will
occur.
"EWG" means an "exempt wholesale generator", as defined in Section
32(a)(1) of the 1935 Act or any related Legal Requirement.
"Extended Term" has the meaning set forth in paragraph (b) of Section 6
hereof.
"Facility" means the real and personal property and the improvements and
equipment (including all related appliances, appurtenances, accessions,
controls, interconnection facilities, transmission lines, wiring, furnishings,
materials and parts, and other related facilities and equipment, along with any
replacements thereof) thereon (including, without limitation, each of Unit 1,
Unit 2 and Unit 3), which constitute an approximately 1,742 megawatt electric
generating facility located in the Borough of Queens, New York, as more
particularly described in Exhibits E and F hereto, including without limitation
the Facility Assets, the leasehold interest of the Lessor under the Site Lease
and the Easements and other rights granted or assigned to Lessor under the Site
Lease. To the extent that portions of the Facility are personal or real
property, respectively, the provisions of this Lease with respect to Equipment
or Property, respectively, shall be applicable thereto, except as may be
otherwise expressly indicated. This definition of "Facility" does not include
any Additional Property.
"Facility Assets" means the buildings, equipment, machinery, apparatus,
fixtures, structures, appurtenances, installations and other tangible personal
property comprising the Facility, including, but not limited to, Unit 1, Unit 2
and Unit 3, which are conveyed to the Lessor pursuant to the Purchase Agreement
Assignment and all replacements and renewals pursuant to the terms of this Lease
located upon or affixed to the Facility Site. This definition of "Facility
Assets" does not include any Additional Property.
"Facility Site" shall mean the real property situated in the Borough of
Queens, Long Island City, New York, upon which the Facility Assets are located,
as more particularly described on Exhibit F hereto, including the respective
Easements and licenses relating thereto and necessary to operate and maintain
the Facility.
"Facility Support Agreement" means the Facility Support Agreement, dated
as of the date hereof, between the Lessor and the Lessee, as the same may be
amended, restated, modified or supplemented from time to time.
"FERC" means the Federal Energy Regulatory Commission, or any successor
agency thereto.
"Financing Arrangement" means, with respect to the Facility or any other
Parcel of Property or Unit of Equipment, as the case may be, each credit
agreement, note purchase agreement, loan agreement, security agreement,
indenture, mortgage, deed of trust, and each other agreement or arrangement
between the Lessor and a lender or lenders to the Lessor or other Person or
Persons providing credit support to the Lessor or to debt issued by or on behalf
of the Lessor related to the financing or (subject to the Lessee's consent)
refinancing of the Facility or such other Parcel of Property or Unit of
Equipment, as the case may be, as any of the same may be amended, restated,
modified or supplemented from time to time (except for any such amendment,
restatement, modification or supplement which affects any obligation of the
Lessee hereunder, unless approved in writing by the Lessee).
"FPA" has the meaning set forth in paragraph (o) of Section 2(i) hereof.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, applied on a consistent basis.
"Governmental Action" has the meaning set forth in paragraph (d) of Section
2(i) hereof.
"Governmental Authority" means any agency, department, court or other
administrative, legislative or regulatory authority of any federal, state, local
or foreign governmental body.
"Ground Lease" means (i) with respect to the Facility, the Site Lease
and (ii) with respect to any other Parcel of Property, each ground lease (in
each case, which must be a Mortgageable Ground Lease) pursuant to which a
leasehold interest in such Parcel is being leased to the Lessor.
"Guaranty" means the Guaranty, dated as of the date hereof, from the
Guarantor to the Lessor, as the same may be amended, restated, modified or
supplemented from time to time.
"Guarantor" means KeySpan Corporation (d/b/a KeySpan Energy), a New York
corporation (the parent of the Lessee), and its successors.
"Indebtedness" means for any Person (i) all indebtedness or other
obligations of such Person for borrowed money and all indebtedness of such
Person with respect to any other items (other than income taxes payable,
deferred taxes, deferred credits and accounts payable which are not more than
thirty (30) days past due, or if more than thirty (30) days past due, are being
contested pursuant to a Permitted Contest) which would, in accordance with GAAP,
be classified as a liability on the balance sheet of such Person, (ii) all
obligations of such Person to pay the deferred purchase price of property or
services, including any such obligations created under or arising out of any
conditional sale or other title retention agreement, (iii) all obligations of
such Person (contingent or otherwise) under reimbursement or similar agreements
with respect to the issuance of letters of credit, (iv) all indebtedness or
other obligations of such Person under or in respect of any swap, cap, collar or
other financial hedging arrangement, (v) all indebtedness or other obligations
of any other Person of the type specified in clause (i), (ii), (iii) or (iv)
above, the payment or collection of which such Person has guaranteed (except by
reason of endorsement for collection in the ordinary course of business) or in
respect of which such Person is liable, contingently or otherwise, including,
without limitation, liable by way of agreement to purchase products or
securities, to provide funds for payment, to maintain working capital or other
balance sheet conditions or otherwise to assure a creditor against loss, and
(vi) all indebtedness or other obligations of any other Person of the type
specified in clause (i), (ii), (iii), (iv) or (v) above secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien, upon or in property (including, without limitation,
accounts and contract rights) owned by such Person, whether or not such Person
has assumed or becomes liable for the payment of such indebtedness or
obligations.
"Indemnified Person" has the meaning set forth in Section 11 hereof.
"Initial Term" has the meaning set forth in paragraph (a) of Section 6
hereof.
"Insurance Requirements" means all insurance required to be obtained
with respect to the Facility and any other Property or Equipment from time to
time pursuant to Section 10 hereof and all terms of any insurance policy
covering or applicable to the Facility and such other Property or Equipment, all
requirements of the issuer of any such policy, all statutory requirements and
all orders, rules, regulations and other requirements of any governmental body
related to insurance applicable to the Facility and such other Property or
Equipment, including without limitation the Board of Fire Underwriters.
"Intellectual Property Rights" means, collectively, all patents, patent
applications, trademarks (whether registered or not), trademark applications,
trade names, proprietary computer software or copyrights (or any licenses,
permits or agreements with respect to any of the foregoing) necessary to
construct, operate, lease or use the Facility or any Property or Equipment or
any part thereof.
"ISO" means the New York Independent System Operator.
"Leasehold Mortgage" means the leasehold mortgage to be executed and
delivered by the Lessor with respect to the Ground Lease relating to the
Facility pursuant to Section 8(i) hereof or with respect to any other Parcel of
Property, as the case may be.
"Lease Rate Date" has the meaning set forth in paragraph (b) of Section 7
hereof.
"Lease Term" means, with respect to the Facility and any other Parcel of
Property or Unit of Equipment, the Initial Term plus the Extended Term thereof,
if any.
"Legal Requirements" means, at the time of determination, all then
effective laws, judgments, decrees, ordinances and regulations and any other
governmental rules, orders and determinations and all requirements having the
force of law, now or hereinafter enacted, made or issued, whether or not
presently contemplated, and all agreements, covenants, conditions and
restrictions, applicable to the Facility and any other Parcel of Property or
Unit of Equipment and/or the ownership, operation or use thereof, including,
without limitation, all zoning laws, ordinances, regulations and building codes,
all requirements of labor laws and Environmental Requirements, compliance with
which is required at any time from the date hereof through the Lease Term and
any Renewal Term, whether or not such compliance shall require structural,
unforeseen or extraordinary changes to the Facility or such other Parcel or Unit
and or the operation, occupancy or use thereof.
"Lessee" has the meaning set forth in the first paragraph of this Lease.
"Lessor" means LIC Funding, Limited Partnership or any successor or
successors to all of its rights and obligations as the Lessor hereunder and, for
purposes of Section 11 hereof, shall include any partnership (general or
limited), corporation, limited liability company, trust, individual or other
entity which computes its liability for income or other taxes on a consolidated
basis with LIC Funding, Limited Partnership or the income of which for purposes
of such taxes is, or may be, determined or affected directly or indirectly by
the income of the Lessor or its successor or successors.
"LIBOR Rate" means the rate of interest per annum (rounded upwards, if
necessary, to the nearest 1/16th of 1%) quoted by The Bank of New York to the
Lessor at or before 10:00 a.m. (New York, New York time) (or as soon thereafter
as practicable), for the offering to The Bank of New York by prime banks in the
London Eurodollar interbank market, at the time of determination and in
accordance with the then usual practice in such market, of deposits in dollars
for delivery on such date and having a maturity equal to one month. Each
determination by the Lessor of the LIBOR Rate shall be conclusive and binding,
absent manifest error, and may be computed using any reasonable averaging and
attribution method.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other), or other security agreement
of any kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"Management Agreement" means the Management Agreement, dated as of the
date hereof, between the Lessor and Merrill Leasing, as the same may be amended,
restated, modified or supplemented from time to time.
"Management Fee" means:
(a) At each Basic Rent Payment Date during the Initial Term, the sum of
an amount equal to the sum of:
(i) the Acquisition Cost, multiplied by
(ii) a fraction having a numerator equal to 180 and a
denominator of 360, multiplied by
(iii)the decimal equivalent of a percentage equal to 0.14%.
(b) At each Basic Rent Payment Date during the Extended Term, the sum of
an amount equal to the sum of:
(i) the Acquisition Cost, multiplied by
(ii) a fraction having a numerator equal to 180 and a
denominator of 360, multiplied by
(iii)the decimal equivalent of a percentage equal to 0.13%.
"Material Contracts" means any contract entered into by the Lessee with
one or more Persons that is material to the sale of electric capacity and/or
energy produced at the Facility or any Turbine Unit or to the operation or
maintenance of the Facility or any Turbine Unit or any service in connection
therewith, including, without limitation, electric capacity and energy sales
contracts, operation and maintenance contracts, fuel supply contracts,
transmission service contracts, goods and services contracts and all contracts
or subcontracts that are material to the provision of the services, materials,
supplies and benefits contemplated by the Facility Support Agreement. The
Material Contracts existing at the date hereof are listed on Exhibit H hereto.
"Material Subsidiary" means each of Brooklyn Union Gas and Brooklyn
Union East, and any other Affiliate of the Guarantor which is engaged in the
Core Gas Distribution Business.
"Merrill Leasing" means ML Leasing Equipment Corp., a Delaware corporation.
"Merrill Lynch" means Merrill Lynch & Co., Inc., a Delaware corporation.
"Mortgageable Ground Lease" means, with respect to the Facility, the
Site Lease, and means, with respect any other Parcel of Property to be subleased
to the Lessee, a ground lease which is delivered to the Lessor for execution by
the Lessor, or assigned to the Lessor by an assignment in form and substance
satisfactory to the Lessor, and having such terms and characteristics as may be
required by the Lessor and any Related Assignee, which terms and characteristics
shall include, without limitation, the following: (a) free assignability to (i)
any lender as security for a borrowed money obligation of the Lessor and, upon
foreclosure of such security, freely assignable by such lender to any third
party, and (ii) any purchaser in connection with a sale of such other Parcel of
Property pursuant to the provisions of this Lease (the Lessor and any Related
Assignee being released from liability upon such assignment); (b) a term
(including renewals) of at least ten (10) years in excess of the Lease Term of
such other Parcel of Property to which such ground lease relates; (c) no
provisions for percentage or variable rent; (d) permit any lawful use; (e) no
provision for a security deposit; (f) a requirement that any Related Assignee or
any lender will receive copies of all notices of default delivered under or
pursuant to such ground lease; (g) a provision that any Related Assignee or any
lender shall have the right to cure any defaults thereunder (whether monetary or
nonmonetary in nature), and in the event of such cure to receive a new ground
lease on the same terms as the original ground lease; (h) a no recourse section
in accordance with the language set forth in Section 31 hereof; (i) a
prohibition of any mortgages or other Liens on the underlying fee, except
Permitted Liens; and (j) no provision requiring the Lessor to indemnify any
Person. A Mortgageable Ground Lease shall be delivered with such estoppel
certificates, recognition and attornment agreements, or confirmation of
customary mortgagee protection as are reasonably acceptable to the Lessor and
any Related Assignee. The Site Lease is a Mortgageable Ground Lease and each
other Ground Lease shall be a Mortgageable Ground Lease.
"1935 Act" means the Public Utility Holding Company Act of 1935, as
amended from time to time, and the rules and regulations from time to time
issued, published or promulgated pursuant thereto.
"Notes" means the 6.91% Senior Notes due 2009 in an aggregate principal
amount of $412,250,000, issued by the Lessor pursuant to the Note Purchase
Agreement.
"Note Purchase Agreement" means, collectively, the several Note Purchase
Agreements, each dated as of June 9, 1999, between the Lessor and the purchasers
of the Notes, as the same may be amended, restated, modified or supplemented
from time to time.
"Operative Documents" means this Lease, the Guaranty, each Ground Lease,
each Consent, the Facility Support Agreement, the Purchase Agreement, the
Purchase Agreement Assignment, the SNDA (as defined in the Note Purchase
Agreement), the Landlord's Consent (as defined in the Note Purchase Agreement)
and each agreement, certificate, instrument or other writing delivered by the
Lessee or the Guarantor in connection with any of the foregoing.
"PCBs" means polychlorinated biphenyls.
"Permitted Contest" has the meaning set forth in paragraph (a) of Section
28 hereof.
"Permitted Liens" means the following Liens and other matters now or
hereafter affecting title to the Facility or any other Parcel of Property or
Unit of Equipment: (i) Liens securing the payment of taxes, assessments and
other governmental charges or levies which are either not delinquent or, if
delinquent, are being contested by the Lessee in good faith as a Permitted
Contest (provided that the Lessee is in compliance with any security
requirements under paragraph (b) of Section 28 hereof relating thereto); (ii)
with respect to the Facility and the Additional Property, zoning and planning
restrictions, subdivision and platting restrictions; (iii) with respect to any
other Parcel of Property, easements, rights-of-way, licenses, reservations,
covenants, conditions, waivers and restrictions on the use of such Parcel of
Property, minor encroachments or minor irregularities of title none of which
individually or in the aggregate could reasonably be expected to materially
impair the intended use or value of such Parcel; (iv) reservations of mineral
interests, none of which can reasonably be expected to impair the intended use,
actual use, operation, leasing, ownership or value of the Facility; (v)
mechanics', carriers', workers', repairers' and other similar liens arising or
incurred in the ordinary course of business relating to obligations as to which
there is no default on the part of the Lessee or the validity of which are being
contested in good faith as a Permitted Contest and which, in the aggregate, do
not exceed $5,000,000; (vi) the title matters set forth in the title policies or
specimen title policies issued in favor of the Lessor by various title
companies, on the date hereof or the Effective Date in respect of any other
Parcel of Property or Unit of Equipment, as the case may be; (vii) with respect
to the Facility and the Additional Property, all matters disclosed on the survey
prepared by GEOD Corporation or, with respect to any other Parcel of Property,
all matters disclosed on the survey prepared with respect to such Parcel of
Property and any other facts that would be disclosed by an accurate survey and
physical inspection of such Parcel of Property; (viii) restrictions and
regulations imposed by the ISO, any Governmental Authority or any local, state,
regional, national or international reliability council; (ix) with respect to
the Facility and the Additional Property, the Liens created by the Lessor
pursuant to or as contemplated by the Collateral Indenture or any Finance
Document (as defined in the Note Purchase Agreement), and with respect to other
Property or Equipment, the Liens on or in respect of such other Property or
Equipment created by the Lessor pursuant to or as contemplated by this Lease or
any Financing Arrangement; (x) leases and licenses in effect with respect to the
Facility, the Additional Property or any Parcel of Property which are permitted
by this Lease or which are delivered to and accepted by the Lessor and the
Related Assignee prior to the Facility's or such Parcel's Effective Date; and
(xi) such other or additional matters as may be approved in writing by the
Lessor and, in the case of the Facility or the Additional Property, the Related
Assignee, and in the case of any other Property or Equipment, any Related
Assignee with respect thereto; provided, that solely for the duration of the
Post-Closing Period, the term "Permitted Liens" shall include such other Liens
which would not, individually or in the aggregate, reasonably be expected to
materially impair the continued use and operation of the Facility.
"Person" means any individual, corporation, partnership, limited
liability company, private limited company, joint venture, association,
joint-stock company, trust, unincorporated organization of government or any
agency or political subdivision thereof.
"Pilko Environmental Report" means the Phase I Environmental Assessment
of Ravenswood Generating Station prepared by Pilko & Associates, Inc., dated May
28, 1999, as supplemented by letter from Pilko & Associates, Inc., dated June 8,
1999.
"Possessory Remedy" has the meaning set forth in paragraph (o) of Section
2(i) hereof.
"Post-Closing Period" has the meaning set forth in paragraph (i) of Section
2(ii) hereof.
"Potential Default" means any event which, but for the lapse of time, or
giving of notice, or both, would constitute an Event of Default.
"Private Placement Memorandum" means the Confidential Private Placement
Memorandum dated April 1999, prepared with respect to the offering of the notes
sold pursuant to the Note Purchase Agreement, together with Appendices A, B and
C attached thereto.
"Property" means any and all parcels of land together with all buildings
and other improvements (including, without limitation, the attachments,
appliances, equipment, machinery and other affixed property which, in each case,
would constitute "fixtures" under Section 9-313(l)(a) of the Uniform Commercial
Code) now or hereafter located on such parcels of land, leased or to be leased
hereunder and, when leased, evidenced by Unit Leasing Records, and the
respective easements, rights and appurtenances relating to such parcels of land,
buildings and improvements. "Parcel" or "Parcel of Property" means a specific
parcel or parcels of Property. This definition of "Property" does not include
any Additional Property.
"Prudent Utility Practice" means, as the context may require, at a
particular time any of the practices, methods and acts (including, without
limitation, methods or acts engaged in or approved by at least a substantial
portion of the electric utility industry prior thereto) which, (i) in the
exercise of the Lessee's reasonable judgment in light of the facts and the
characteristics of the Facility or other Property or Equipment known at the time
the decision was made, would have been expected to accomplish the desired result
at the lowest reasonable cost consistent with reliability, safety and
expedition, good customer relations and, except as otherwise permitted by the
last sentence of paragraph (c) of Section 8 hereto, applicable Legal
Requirements and (ii) are consistent with the practices, methods and acts
employed by the Lessee with respect to electric generating facilities of similar
design, construction and regulatory status as, and at such time similarly
situated to, the Facility or such other Property or Equipment. "Prudent Utility
Practice" is not intended to be limited to the optimum practice, method or act,
to the exclusion of all others, but rather to be a spectrum of reasonable and
prudent practices, methods or acts.
"Purchase Agreement" means the Generating Plant and Gas Turbine Asset
Purchase and Sale Agreement, dated as of January 28, 1999, as amended on May 24,
1999, and as further amended by the Purchase Agreement Assignment, between Con
Edison and the Guarantor, including the schedules and exhibits thereto.
"Purchase Agreement Assignment" means the Second Amendment, Consent,
Assignment and Assumption Agreement, dated as of June 18, 1999, among the
Guarantor, the Lessee, KeySpan-Ravenswood Services Corp., Con Edison and the
Lessor, pursuant to which the Guarantor assigns to the Lessor certain of the
Guarantor's rights under the Purchase Agreement to acquire the Facility Assets,
as the same may be amended, restated, modified or supplemented from time to
time.
"Recordable Documents" has the meaning set forth in paragraph (i) of
Section 8 hereof.
"Recording Event" has the meaning set forth in paragraph (i) of Section 8
hereof.
"Related Assignee" means, (A) with respect to the Facility, the
Collateral Trustee, and (B) with respect to any other Parcel of Property or Unit
of Equipment, the respective trustee or agent under Financing Arrangements
pursuant to which such trustee or agent provided, and/or acted in a fiduciary
capacity for lenders which provided, credit support or other financing to the
Lessor and to which an interest in this Lease or in any other Parcel of Property
or Unit of Equipment was assigned conditionally or otherwise by the Lessor in
accordance with Section 21. For purposes of paragraphs (d), (e), (f) and (o) of
Section 2(i), paragraphs (d) and (e) of Section 5, paragraph (b) of Section 9,
paragraph (a) of Section 10, the last sentence of clause (ii) of paragraph (d)
of Section 10, clause (iv) (other than the last reference to the Related
Assignee therein) of paragraph (d) of Section 10, paragraph (h) of Section 10,
Section 11, Section 14, clause (iv) of paragraph (j) of Section 18, the second
reference in paragraph five of Section 19, paragraph (b) of Section 21, Section
27, and clause (iii) of paragraph (a) of Section 28 hereof, the term "Related
Assignee" shall include each of the purchasers and holders from time to time of
the Notes and for purposes of paragraphs (d), (f), (g) and (h) of Section 2(ii),
paragraph (b) of Section 5, paragraphs (d), (h), (i)(x) and (i)(A) and (D) of
Section 8, paragraph (e) of Section 9, paragraphs (b), (c), (e) and (f) of
Section 10 and clauses (x) and (xi) of the definition of "Permitted Liens", the
term "Related Assignee" shall include each of the Qualifying Noteholders (as
defined in the Note Purchase Agreement). In addition, if any action, inaction,
matter, consent or approval under this Lease is required to be performed or not
to be performed or occurs and the same will directly or indirectly affect both
the Facility and any other Parcel of Property or Unit of Equipment, then the
applicable references to the "Related Assignee" shall be deemed to include each
Related Assignee with respect to the Facility, Parcel of Property or Unit of
Equipment, as applicable.
"Release" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migrating into
the indoor or outdoor environment of any Contaminant through or in the air,
soil, surface water, groundwater, or any structure.
"Remedial Action" means actions required or otherwise undertaken by a
Governmental Authority, or which are appropriate as a matter of prudent business
practice and commercial reasonableness, to (i) investigate, remediate, contain,
isolate, remove, treat or in any other way address Contaminants in the indoor or
outdoor environment; (ii) address the threatened Release of Contaminants; (iii)
investigate if a Release or threat of a Release has occurred or to determine the
extent of a Release; (iv) perform a risk analysis relating to Contaminants that
have been Released; or (v) perform post-remedial investigation, monitoring,
operation, maintenance and care.
"Removable Improvements" has the meaning set forth in paragraph (b) of
Section 8 hereof.
"Renewal Term" has the meaning set forth in paragraph (c) of Section 13
hereof.
"Responsible Officer" shall mean the President, any Vice President, the
Treasurer or any Assistant Treasurer of the Lessee, or any other officer of the
Lessee primarily responsible for the administration of the obligations of the
Lessee with respect to this Lease.
"SEC" means the Securities and Exchange Commission, or any successor agency
thereto.
"Segregated Unit" has the meaning set forth in paragraph (a) of Section 13
hereof.
"Semi-Annual Cost of Debt" means, with respect to the Facility or any
other Parcel of Property or Unit of Equipment leased hereunder, the weighted
average percentage cost per annum (including as part of such cost any fees
payable under or pursuant to any Financing Arrangements relating to the Facility
or such Parcel or Unit) of borrowings outstanding under the applicable Financing
Arrangements (whether or not interest is accruing at a default rate) at any
time, in each case, during the period from and including the 16th day of the
calendar month in which the semi-annual period for which Basic Rent is being
computed begins to and including the 15th day of the calendar month in which
such semi-annual period ends (the "Computation Period") to finance or refinance
the acquisition and ownership of the Facility or such Property or Equipment, as
the case may be.
"Site Lease" means the Ground Lease and Easement Agreement, dated as of
June 18, 1999, between the Lessee, as ground lessor, and the Lessor, as ground
lessee, pursuant to which a leasehold interest in the Facility Site is being
leased and non-terminable rights to the Additional Property are being granted to
the Lessor, as the same may be amended, restated, modified or supplemented from
time to time.
"Taking" has the meaning set forth in paragraph (a) of Section 16 hereof.
"Termination Covenants" means the following covenants made by the Lessee
to the Lessor as a condition to the sale of the Facility or any other Parcel of
Property or Unit of Equipment pursuant to Section 12 hereof: on the date of such
sale (a) no Event of Default, Potential Default, Event of Loss or Event of Lease
Termination shall have occurred and be continuing and the Lessee shall have
delivered to the Lessor and the Related Assignee a certificate of a Responsible
Officer to such effect, (b) the Facility, the Additional Property or such Parcel
or Unit shall not be undergoing any repairs, additions or alterations that could
reasonably be expected to diminish (by more than a de minimus amount) the fair
market value, utility or remaining economic useful life which the Facility, the
Additional Property or such Parcel or Unit would have had at such time had such
repair, addition or alteration not been undergoing (assuming the Facility, the
Additional Property or such Parcel or Unit is in the condition required hereby),
(c) the Facility, the Additional Property or such Parcel or Unit shall be in
compliance with all Legal Requirements, (d) the Lessee shall, at its expense,
deliver to the Lessor an Environmental Report prepared by the Environmental
Consultant satisfactory in scope and content to the Lessor and the Related
Assignee in their reasonable discretion, to the effect that (i) no Environmental
Matters exist with respect to the Facility, the Additional Property or such
Parcel or Unit as a result of the construction, operation and maintenance of the
Facility, the Additional Property or such Parcel or Unit and (ii) the Facility,
the Additional Property or such Parcel or Unit may be commercially operated in
compliance with Environmental Requirements and (e) the Lessee shall deliver to
the Lessor and the Related Assignee a report of an independent engineer
reasonably satisfactory to the Lessor and the Related Assignee, to the effect
that (i) the Facility or such Parcel or Unit has been maintained in all material
respects in accordance with the terms and conditions of Section 9 of this Lease,
(ii) the Facility or such Parcel or Unit is capable of being operated in
accordance with (A) the Capacity of the Facility or such Unit, as the case may
be, taking into account ordinary wear and tear resulting from the operation of
the Facility or such Unit, (B) Prudent Utility Practice and (C) all applicable
Environmental Requirements, and (iii) the proposed sale of such other Parcel or
Unit will not adversely affect the operation of the Facility.
"Termination Event Date" has the meaning set forth in Section 14 hereof.
"Termination Notice" has the meaning set forth in paragraph (a) of Section
12 hereof.
"Termination Settlement Date" has the meaning set forth in Section 14
hereof.
"Turbine Unit" means Unit 1, Unit 2 or Unit 3, or, if the context
otherwise requires, any other Unit of Equipment which is an electric generating
facility, as the case may be.
"Unit 1" means the Property and the improvements and Equipment
(including all related appliances, appurtenances, accessions, controls,
interconnection facilities, transmission lines, wiring, furnishings, materials
and parts, and other related facilities and equipment, along with any
replacements thereof) constructed thereon, which constitute an approximately 385
megawatt steam turbine generator, as more particularly described in Exhibit E
hereto.
"Unit 2" means the Property and the improvements and Equipment
(including all related appliances, appurtenances, accessions, controls,
interconnection facilities, transmission lines, wiring, furnishings, materials
and parts, and other related facilities and equipment, along with any
replacements thereof) constructed thereon, which constitute an approximately 385
megawatt steam turbine generator, as more particularly described in Exhibit E
hereto.
"Unit 3" means the Property and the improvements and Equipment
(including all related appliances, appurtenances, accessions, controls,
interconnection facilities, transmission lines, wiring, furnishings, materials
and parts, and other related facilities and equipment, along with any
replacements thereof) constructed thereon, which constitute an approximately 972
megawatt steam turbine generator, as more particularly described in Exhibit E
hereto.
"Unit Leasing Record" means an instrument, substantially in the form of
Exhibit B hereto, evidencing the lease of the Facility or any other Parcel or
Parcels of Property or Unit or Units of Equipment under this Lease.
"Unit Purchase Price" has the meaning set forth in paragraph (b) of Section
13 hereof.
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE.
(i) The Lessee represents and warrants to the Lessor:
(a) Corporate Matters. The Lessee (i) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of New York, (ii) has all requisite power, authority and legal right to own and
operate its properties and to conduct its business as presently conducted and
proposed to be conducted after giving effect to the transactions contemplated
hereby and to execute, deliver and perform its obligations under this Lease, any
other Operative Document to which it is a party and any Material Contract, and
(iii) is duly qualified to do business as a foreign corporation in good standing
in each jurisdiction in which its ownership or leasing of properties or the
conduct of its business requires such qualification, except where the failure to
so qualify would not impair the ability of the Lessee to perform its obligations
under the Operative Documents to which it is a party.
(b) Binding Agreements. This Lease and each other Operative Document to
which it is a party have been duly authorized, executed and delivered by the
Lessee and, assuming the due authorization, execution and delivery or acceptance
of this Lease and such Operative Documents by the other parties thereto, this
Lease and each such Operative Document are legal, valid and binding obligations
of the Lessee, enforceable according to their respective terms, except (i) as
the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to creditor's or
lessor's rights generally and (ii) for the application of equitable principles,
whether applied by a court of equity or law.
(c) Compliance with Other Instruments. The execution and delivery by the
Lessee of this Lease and any other Operative Document to which it is a party and
the performance by the Lessee of the transactions contemplated hereby and
thereby, and the performance of any Material Contract, will not result in any
violation of any term of the certificate of incorporation or the by-laws of the
Lessee, do not require stockholder approval or the approval or consent of any
trustee or holders of Indebtedness of the Lessee except such as have been
obtained prior to the date hereof and will not conflict with or result in a
breach of any terms or provisions of, or constitute a default under, or result
in the creation or imposition of any Lien (other than a Permitted Lien) upon any
property or assets of the Lessee under, any indenture, mortgage or other
material agreement or instrument to which the Lessee is a party or by which it
or any of its property is bound, or any existing applicable law, rule,
regulation, license, judgment, order or decree of any Governmental Authority or
court having jurisdiction over the Lessee or any of its activities or
properties.
(d) Governmental Consents. There are no consents, licenses, orders,
authorizations, approvals, Environmental Approvals, permits, waivers, extensions
or variances of, or notices to or registrations or filings with any Governmental
Authority (each a "Governmental Action") which are required under Legal
Requirements applicable to the Lessee or any of its Affiliates in connection
with the valid execution, delivery and performance of this Lease or any other
Operative Document, and no Governmental Action (i) is required to be obtained
during the term of this Lease with respect to the Facility, the Additional
Property or any other Property or Equipment, solely by reason of any
participation by the Lessor, any Related Assignee, the Lessee, Merrill Lynch,
Merrill Leasing or any Affiliate of the foregoing in connection with the
transactions contemplated by this Lease, any other Operative Document, the
Purchase Agreement, the Purchase Agreement Assignment, or any bill of sale,
deed, assignment, assumption or ownership agreement relating to the Facility,
the Additional Property or any other Property or Equipment, or (ii) is required
in connection with the acquisition, operation, ownership, leasing or financing
of the Facility, the Additional Property or any other Property or Equipment (or
any part thereof) or the sale or delivery of electric capacity and energy from
the Facility or any Turbine Unit, except such Governmental Actions (A) as have
been duly filed, obtained, given or accomplished, with true copies thereof
delivered to the Lessor and the Related Assignee (except for filings to be made
upon the occurrence of a Recording Event), (B) as may be required by applicable
law not now in effect, (C) as are building, occupancy or other routine
Governmental Actions, including without limitation the transfer into the name of
the Lessee of existing Governmental Actions with respect to the Facility, which
are described on Exhibit G hereto and are obtainable in the ordinary course of
business, but only if the failure to obtain such Governmental Actions by the
date hereof could not (x) impair the ability of the Lessee to perform its
obligations under this Lease or the other Operative Documents to which it is a
party, (y) reasonably be expected to materially impair the ability of the
Facility or any Turbine Unit to perform in commercial operation and to operate
substantially at its Capacity or (z) result in an Event of Lease Termination or
an event described in clause (A), (B) or (C) of Section 15(c) hereof, (D) as may
be required upon the exercise of Possessory Remedies, or (E) which, if not
obtained or effected, would not, individually or in the aggregate, (x) impair
the ability of the Lessee to perform its obligations under this Lease or the
other Operative Documents to which it is a party, (y) reasonably be expected to
materially impair the ability of the Facility or any Turbine Unit to perform in
commercial operation and to operate substantially at its Capacity or (z) result
in an Event of Lease Termination or an event described in clause (A), (B) or (C)
of Section 15(c) hereof. Governmental Actions referred to in clause (A) are
listed in Exhibit G hereto and are in full force and effect and, except as
otherwise set forth on Exhibit G hereto, no such Governmental Action is the
subject of appeal or reconsideration or other review, and the time in which to
make an appeal or request the reconsideration of any such Governmental Action
has expired without any appeal or request for review or reconsideration having
been taken or made.
(e) Changes. Since March 31, 1999, there has been no material adverse
change in the business, assets, properties, revenues, financial condition or
operations of the Lessee, nor any change which could reasonably be expected to
have a material adverse effect on (i) the ability of the Lessee to observe and
perform its obligations under this Lease or the other Operative Documents to
which it is a party in a timely manner or (ii) the rights or interests of the
Lessor or any Related Assignee under the Operative Documents.
(f) Litigation. There is no action, suit, proceeding or investigation at
law or in equity by or before any court, governmental body, agency, commission
or other tribunal now pending or, to the best knowledge of the Lessee,
threatened against or affecting the Lessee or any property or rights of the
Lessee which (i) questions the validity or enforceability of any Operative
Document, (ii) could reasonably be expected to materially adversely affect the
Facility, the Additional Property or any other Parcel of Property or Unit of
Equipment, (iii) could reasonably be expected to have a material adverse effect
on the business, assets, properties, revenues, financial condition or operations
of the Lessee or (iv) if adversely determined, would (x) materially impair the
ability of the Lessee to perform its obligations under the Operative Documents
to which it is a party or (y) result in an Event of Lease Termination or an
event described in clause (A), (B) or (C) of Section 15(c) hereof. The
representations and warranties of the Lessee set forth in this paragraph (f)
shall not apply to environmental matters, with respect to which the
representations and warranties set forth in paragraph (u) of Section 2(i) hereof
shall exclusively apply.
(g) No Default, Etc. No Event of Lease Termination has occurred, and no
event has occurred and no condition exists which would constitute a Potential
Default or an Event of Default under this Lease.
(h) Compliance with Legal Requirements and Insurance Requirements. The
operation, use and physical condition of the Facility, the Additional Property
and any other Property and Equipment (i) are in full compliance with all
Insurance Requirements and all premiums due with respect to such Insurance
Requirements have been paid and (ii) are in full compliance with all Legal
Requirements, except any Legal Requirements the noncompliance with which,
individually or in the aggregate, would not (x) impair the ability of the Lessee
to perform its obligations under this Lease or the other Operative Documents to
which it is a party, (y) reasonably be expected to materially impair the ability
of the Facility and each Turbine Unit to perform in commercial operation
substantially at its Capacity or (z) result in an Event of Lease Termination or
an event described in clause (A), (B) or (C) of Section 15(c) hereof. The
representations and warranties of the Lessee set forth in this paragraph (h)
shall not apply to environmental matters, with respect to which the
representations and warranties set forth in paragraph (u) of Section 2(i) hereof
shall exclusively apply.
(i) Liens. Neither the Facility, the Additional Property nor any other
Parcel of Property or Unit of Equipment is subject to any Lien, except Permitted
Liens, and none of such Permitted Liens could reasonably be expected to
materially interfere with the use or possession of the Facility, the Additional
Property or such Parcel or Unit or the use or exercise by the Lessor of its
rights under this Lease or any other document contemplated hereby or entered
into in connection herewith.
(j) Status of Lessee. All of the Lessee's common stock is owned
beneficially and of record by the Guarantor.
(k) Guaranty. The Guaranty has been duly authorized, executed and
delivered by the Guarantor and is a legal, valid and binding obligation of the
Guarantor, enforceable according to its terms, except (i) as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to creditor's or lessor's
rights generally and (ii) for the application of equitable principles, whether
applied by a court of equity or law.
(l) Facility Support Agreement. The Facility Support Agreement has been
duly authorized, executed and delivered by the Lessee and, assuming the due
authorization, execution and delivery of the Facility Support Agreement by the
Lessor, is a legal, valid and binding obligation of the Lessee, enforceable
according to its terms, except (i) as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditor's or lessor's rights generally and (ii)
for the application of equitable principles, whether applied by a court of
equity or law.
(m) Ground Lease. The Site Lease and each other Ground Lease has been
duly authorized, executed and delivered by the Lessee, as the fee owner, and is
a legal, valid and binding obligation of the Lessee enforceable according to its
terms, except (i) as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to creditor's or lessor's rights generally and (ii) for the
application of equitable principles, whether applied by a court of equity or
law. The Site Lease and each other Ground Lease is a Mortgageable Ground Lease
except to the extent agreed to in writing by the Lessor and Related Assignee,
and is in full force and effect.
(n) 1935 Act. The Lessee is not subject to regulation by the SEC under
the 1935 Act as a "public-utility company" or a "holding company", within the
meaning of the 1935 Act.
(o) Regulation. Neither the Lessor, any Related Assignee nor any of
their respective Affiliates shall, solely by reason of (i) its entering into
this Lease or any other document contemplated hereby, (ii) the acquisition,
ownership, leasing or financing of the Facility or any Turbine Unit (or any part
thereof) or (iii) the operation by the Lessee or any Affiliate of the Lessee of
the Facility or any Turbine Unit in accordance with and as contemplated by the
Material Contracts and this Lease, be deemed during the Lease Term or any
Renewal Term to be, and be subject to financial, rate, utility or other similar
regulation as, a public utility, or an electric utility or a public utility
holding company under any Legal Requirement (including any Legal Requirement (A)
under the 1935 Act, (B) imposed by any state or local public utility commission
or other similar regulatory body, authority or group having jurisdiction over
the Lessor or the Lessee or any such transactions or activities, or (C) under
the Federal Power Act, as amended (the "FPA")), except (other than in the case
of (A)) in connection with the exercise of any remedy under which the Lessor or
the Related Assignee or any of their respective Affiliates would operate,
possess or control the Facility or any Turbine Unit (a "Possessory Remedy"). All
Governmental Actions necessary to accomplish this result are listed on Exhibit G
hereto and have been duly obtained, given or accomplished, with true copies
thereof delivered to the Lessor.
(p) Operation of the Facility and Turbine Units. Except as set forth in
the Engineering Report or on Schedule 2(i)(p) hereto, to the best knowledge of
the Lessee, (i) the operation and maintenance programs relating to the Facility
and each Turbine Unit are consistent with Prudent Utility Practice, (ii) the
Facility and each Turbine Unit have the capacity and functional ability to
perform in commercial operation substantially at its Capacity and in accordance
with Prudent Utility Practice and (iii) there is no present event or condition
which would materially adversely affect the capability of the Facility or any
Turbine Unit to operate substantially at its Capacity. (w) No real property or
equipment of any kind other than the Additional Property is required in
connection with the operation of the Facility, (x) the Easements granted to the
Lessor under the Site Lease provide the Lessor with access to the Facility and
each Turbine Unit or the Additional Property, as applicable, (y) no
condemnation, eminent domain or similar proceeding has been commenced or, to the
Lessee's knowledge, is contemplated with respect to all or any portion of the
Facility Site or the Additional Property or for the relocation of roadways
providing access to the Facility Site and (z) the Facility Site contains valid
and enforceable rights of pedestrian and vehicular access to an open public road
by an Easement appurtenant to and running with the Facility Site.
A true, correct and accurate list of all Facility Assets that the Lessor
owns is attached hereto as Exhibit E. A true, correct and accurate list of all
Additional Property is attached hereto as Exhibit I.
True and correct copies of the Engineering Report have been delivered to
the Lessor and the Related Assignee, and all material Governmental Actions
relating to the operation or maintenance of the Facility and each Turbine Unit
are listed on Exhibit G hereto and, to the extent obtained on or before the date
hereof, have been delivered to the Lessor and the Related Assignee.
(q) Title to Facility and Facility Assets. Good, marketable and valid
title to, or a valid leasehold interest in, the Facility (including, without
limitation, the Facility Assets) and any other Property or Equipment has been
duly, validly and effectively conveyed and transferred to the Lessor free and
clear of all Liens, except Permitted Liens, which representation and warranty is
given by the Lessee to induce the Lessor to acquire the Facility and such other
Property or Equipment and to lease such assets to the Lessee pursuant to this
Lease. The Lessee has good, marketable and valid title to or, except for the
revocable consents described on Exhibit G hereto, non-terminable rights to use
the Additional Property and the Site Lease duly provides the Lessor with
non-terminable use and access rights to the Additional Property.
(r) Utility Availability. All utilities required for the operation of
the Facility and any other Property and Equipment, including, but not limited
to, potable water supply, gas, electric and telephone facilities, are (i) with
respect to the Facility, to the best knowledge of the Lessee, available for use
at the boundaries of the Facility Site, (ii) with respect to any other Property
and Equipment, to the best knowledge of the Lessee, available for use at the
boundaries of, or a reasonable distance from, the Parcel of Property as to which
a Ground Lease has been executed and (iii) in any case, arrangements on
commercially reasonable terms have been made for the provision of such services
to the Facility or such other Parcel of Property, as the case may be.
(s) Accuracy of Appraisals. (i) Any written information furnished by the
Lessee to the Appraiser for use by the Appraiser in its appraisal report with
respect to the Facility or any other Property or Equipment was accurate in all
material respects when furnished and is accurate in all material respects as of
the date hereof. (ii) The projections furnished by the Lessee to the Appraiser
for use by the Appraiser in its appraisal report with respect to the Facility
were prepared in good faith and the Lessee believes that the assumptions used in
preparing such projections are reasonable.
(t) Intellectual Property. To the best knowledge of the Lessee, all
patents, copyrights, trademarks, trade secrets, computer software or other
intellectual property rights that are material and are required for the
operation of the Facility and any Property or Equipment in accordance with and
as contemplated by this Lease, the Facility Support Agreement and the Material
Contracts, have been timely obtained and are and will remain in full force and
effect. To the best knowledge of the Lessee, the Lessee owns or has the right to
use all technology, licenses, patents and other proprietary rights that are
material and are required to perform the Lessee's obligations under the Material
Contracts without any conflict with the rights of others.
(u) Environmental Representations. Except as expressly identified in the
Pilko Environmental Report and except for such matters which, individually, are
not reasonably likely to result in or require remedial activities or fines or
penalties in excess of $10,000:
(i) Except as set forth on Schedule 2(i)(u) hereto, to the best
knowledge of the Lessee, the Lessee, the Facility, the Additional Property and
other Property and Equipment are in compliance with, and have at all times been
in compliance with, applicable Environmental Requirements with respect to the
business and operations of the Facility, the Additional Property and any other
Property and Equipment, and no material capital expenditures are anticipated to
maintain or achieve compliance with Environmental Requirements;
(ii) The Lessee has obtained or has taken appropriate and timely
steps, as required by Environmental Requirements, to obtain all Environmental
Approvals required in connection with the ownership and operation of the
Facility, the Additional Property and other Property and Equipment, all such
Environmental Approvals already obtained are in good standing, and the Lessee
and the Facility, the Additional Property or such other Property and Equipment
are currently in material compliance with all terms and conditions of such
Environmental Approvals. To the best knowledge of the Lessee, no change in the
facts or circumstances reported or assumed in the applications for or the
granting of such Environmental Approvals exists. There are not any proceedings
pending or, to the best knowledge of the Lessee, threatened which would
jeopardize the validity of any such Environmental Approvals;
(iii) Except as set forth on Schedule 2(i)(u) hereto, the Lessee
has not received from any party, and has no knowledge of, any written notice of
violation of, or potential liability under, any Environmental Requirement or any
written request for information with respect thereto, nor has the Lessee been
notified or is otherwise aware that it or any predecessor in interest or title
is a potentially responsible party under the Federal Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA") or any similar state law
with respect to the Facility, the Additional Property or any other Property or
Equipment;
(iv) Except as set forth on Schedule 2(i)(u) hereto, with respect
to the business and operations of the Facility, the Additional Property and any
other Property and Equipment, the Lessee is not subject to any outstanding
judgment, decree or judicial order relating to compliance with any Environmental
Requirement or to investigation or cleanup of Contaminants under any applicable
Environmental Requirement;
(v) Except as set forth in Schedule 2(i)(u) hereto, there are no
claims, actions, proceedings or investigations pending, or, to the best
knowledge of the Lessee, threatened against or relating to the Lessee, the
Facility, the Additional Property or any other Property and Equipment, with
respect to the exposure at the Facility, the Additional Property and such other
Property and Equipment of any person to Contaminants, or otherwise arising under
Environmental Requirements;
(vi) No Environmental Lien has attached to any portion of the
Facility, the Additional Property or other Property and Equipment;
(vii) Except as set forth on Schedule 2(i)(u) hereto, to the best
knowledge of the Lessee, there has been no Release of any Contaminants for which
a Remedial Action must be taken at, to, under, from or affecting the Facility,
the Additional Property or other Property and Equipment;
(viii) To the best knowledge of the Lessee, there is not
constructed, placed, deposited, stored, disposed nor located on, under or
affecting the Facility, the Additional Property or other Property and Equipment
any asbestos in any form which has become or threatens to become friable in
violation of Environmental Requirements;
(ix) Except as set forth on Schedule 2(i)(u) hereto, to the best
knowledge of the Lessee, the underground and above-ground storage tanks (whether
or not currently in use), located on, under or affecting the Facility, the
Additional Property, the Facility Site or other Property and Equipment are in
compliance with applicable Environmental Requirements;
(x) Based on the review by the Lessee and its agents of the
matters referred to in Schedule 2(i)(u) hereto, the Lessee has no reason to
believe as of the date of this Lease that such matters, individually or in the
aggregate, could reasonably be expected to have a material adverse effect on (1)
the ability of the Lessee to observe and perform its obligations under this
Lease or the other Operative Documents to which it is a party in a timely
manner, (2) the ability of the Guarantor to perform its obligations under the
Guaranty in a timely manner, (3) the business, assets, properties, financial
condition or operations of the Guarantor, (4) the rights or interests of the
Lessor or the Related Assignee under this Lease or the applicable Financing
Arrangements or (5) the leasing, ownership or value of the Facility.
(ii) The Lessee covenants to the Lessor:
(v) Corporate Existence. The Lessee will remain a validly existing
corporation in good standing under the laws of the State of New York until the
expiration or other termination of this Lease and the indefeasible payment of
all amounts owing hereunder.
(w) Liens. The Lessee will not create, incur, assume or permit to exist
any Lien upon (i) the Facility, the Additional Property or other Property and
Equipment, other than Permitted Liens or those Liens placed thereon by, or
arising from, the Lessor's own actions, or (ii) any of its rights or obligations
with respect to any Ground Lease, the Facility Support Agreement or any Material
Contract other than any Lien granted to the Lessor and assigned by the Lessor to
the Related Assignee. Notwithstanding the foregoing, the Lessee may create a
Lien upon the Additional Property provided that it delivers to the Lessor and
each Related Assignee a subordination and non-disturbance agreement in form and
substance reasonably satisfactory to the Lessor and each Related Assignee.
(x) Subsidiaries. The Lessee will not acquire or create an equity
interest in any Person.
(y) Delivery of Information. The Lessee shall deliver to the Lessor and
each Related Assignee, from time to time, (i) promptly after a Responsible
Officer of the Lessee obtains knowledge of any Event of Default, Potential
Default, Event of Loss or Event of Lease Termination hereunder, a certificate of
a Responsible Officer of the Lessee specifying the nature and period of
existence of such Event of Default, Potential Default, Event of LOSS or Event of
Lease Termination hereunder, and what action, if any, the Lessee has taken, is
taking, or proposes to take with respect thereto, (ii) promptly after a
Responsible Officer of the Lessee obtains knowledge of any material adverse
change in the business, assets, properties, financial condition or operations of
the Lessee, or of any liabilities or obligations arising as a result of tortious
action or Environmental Damages or in respect of governmental fines or
obligations (other than taxes) or liabilities or obligations arising as a result
of Environmental Matters, or of any litigation of the type described in
paragraph (f) of Section 2(i) hereof, a certificate of a Responsible Officer of
the Lessee describing such change, liabilities, obligations or litigation, as
the case may be, and what action, if any, the Lessee has taken, is taking, or
proposes to take with respect thereto, (iii) simultaneously with the delivery by
the Guarantor of each set of quarterly financial statements pursuant to the
Guaranty, a certificate of a Responsible Officer of the Lessee stating, to the
best knowledge of such Responsible Officer after reasonable inquiry, whether
there exists on the date of such certificate any Event of Default, Potential
Default, Event of Loss or Event of Lease Termination hereunder, and if any Event
of Default, Potential Default, Event of Loss or Event of Lease Termination
hereunder exists, specifying the nature and period of existence thereof and what
action, if any, the Lessee has taken, is taking, or proposes to take with
respect thereto, (iv) promptly after a Responsible Officer of the Lessee obtains
knowledge of any legal, governmental or regulatory proceeding that could have a
material adverse effect on (1) the operation, maintenance, leasing, ownership,
use, value or regulatory status of the Facility or any other Parcel of Property
or Unit of Equipment, (2) the ability of the Lessee to observe and perform its
obligations under this Lease or any other Operative Document to which it is a
party in a timely manner, (3) the business, assets, properties, financial
condition or operations of the Lessee, or (4) the rights or interests of the
Lessor or Related Assignee under this Lease, a certificate of a Responsible
Officer of the Lessee, describing each such proceeding and what action, if any,
the Lessee has taken, is taking, or proposes to take with respect thereto and
(v) with reasonable promptness, such other data and information relating to the
business, operations, affairs, financial condition, assets or properties of the
Lessee or relating to the ability of the Lessee to perform its obligations
hereunder as from time to time may be reasonably requested by the Lessor or the
Related Assignee.
(z) 1935 Act. The Lessee shall not become subject to regulation by the
SEC under the 1935 Act as a "public-utility company" or a "holding company",
within the meaning of the 1935 Act.
(aa) Regulation. Neither the Lessor nor any Related Assignee nor any of
their respective Affiliates shall, solely by reason of (i) its entering into
this Lease or any other document contemplated hereby, (ii) the acquisition,
ownership, leasing or financing of the Facility or any Turbine Unit (or any part
thereof) or (iii) the operation by the Lessee or any Affiliate of the Lessee of
the Facility or any Turbine Unit in accordance with and as contemplated by the
Material Contracts and this Lease, be deemed during the term of this Lease, to
be, and be subject to financial, rate, utility or other similar regulation as, a
public utility, or an electric utility or a public utility holding company under
a Legal Requirement (including any Legal Requirement (A) under the 1935 Act, (B)
imposed by any state or local public utility commission or other similar
regulatory body, authority or group having jurisdiction over the Lessor or the
Lessee or any such transactions or activities or (C) under the FPA), except
(other than in the case of (A)) in connection with the exercise of any
Possessory Remedy.
(bb) Environmental Covenants:
(i) The Lessee, the Facility, the Additional Property and any
other Property and Equipment shall comply in all material respects, and the
Lessee shall use its best efforts to cause the compliance by any contractors
engaged in connection with the Facility or any other Property or Equipment, with
all applicable Environmental Requirements, including without limitation, with
respect to the treatment, remediation, removal, transport, storage and/or
disposal of any Contaminant.
(ii) The Lessee shall maintain all Environmental Approvals
necessary for the operation of the Facility, the Additional Property and any
other Property or Equipment and shall remain in material compliance with all
Environmental Approvals.
(iii) The Lessee shall not cause or suffer or permit the
attachment of any Environmental Lien to the Facility, the Additional Property or
any other Property or Equipment or any portion thereof.
(iv) The Lessee shall not cause or suffer or permit the Release
or threatened Release at, to or from the Facility, the Additional Property, any
Property or Equipment, of any Contaminant for which a material Remedial Action
must be taken.
(v) The Lessee shall not cause the transportation or arrange for
the disposal of any Contaminant from the Facility, the Additional Property or
any other Property or Equipment except in compliance with the Environmental
Requirements.
(vi) The Lessee shall not cause or suffer or permit the use of
any asbestos-containing material or any article containing PCBs in connection
with the Facility, the Additional Property or any other Property or Equipment in
violation of the Environmental Requirements.
(vii) Notice of Environmental Events:
(A)The Lessee shall promptly, but in any case within fifteen (15)
Business Days of receiving actual or constructive notice thereof, notify the
Lessor and the Related Assignee if, after the date of this Lease, (1) any
Environmental Matter relating to the Release of Contaminants in, on, beneath,
from or involving the Facility, the Additional Property or any other Property or
Equipment or any part thereof has occurred, or any proceeding has been brought
by a third party under Environmental Requirements (other than proceedings
described in subsection (2) hereof), in each case that could reasonably be
expected to result in Environmental Damages in excess of $500,000, or (2) the
Lessee has received notification that it, the Facility, the Additional Property
or any other Property or Equipment or any part thereof is the subject of a
judicial or administrative proceeding arising under the Environmental
Requirements in which a Governmental Authority is a party, unless the Lessee
reasonably believes that such proceeding will result in no monetary sanctions,
or in monetary sanctions, exclusive of interest and costs, of less than
$100,000, or (3) any Environmental Matter otherwise relating to compliance with
an Environmental Requirement has occurred that could reasonably be expected to
result in Environmental Damages in excess of $1,000,000 (each of (1), (2) and
(3) an "Environmental Event"). Notice as required hereunder shall be deemed to
have been given with respect to Environmental Matters identified in Schedule
2(i)(u) or in the Pilko Environmental Report; provided, however, that this
presumption shall not apply to any adverse development in any such Environmental
Matter that occurs, or of which Lessee becomes aware, after the date hereof,
which adverse development would, regardless of prior notice, in and of itself
constitute an Environmental Event.
(B)Following the receipt of a notice pursuant to (A) above, the
Lessor and the Related Assignee, in each case in their sole discretion, may
require the Lessee to conduct, or cause to be conducted, an environmental
investigation of the Facility, the Additional Property or such Property or
Equipment, the scope of which investigation shall be limited to evaluating the
scope and magnitude of the Environmental Event and to provide a copy of the
investigation report to the Lessor and the Related Assignee. The Lessor and the
Related Assignee, after receipt of the investigation report, may in each case,
in their reasonable discretion, require an investigation of the Environmental
Event by the Environmental Consultant.
(C)The Lessee shall take, or cause to be taken at no cost to the
Lessor or any Related Assignee, such actions as may be necessary to comply in
all respects with all applicable Environmental Requirements and to alleviate any
unreasonable risk to human health or the environment if the same arises from a
condition on or in respect of the Facility, the Additional Property or any other
Property or Equipment or any part thereof, whether existing prior to, on or
after the date of this Lease, provided, however, that it shall have the right to
contest any such Environmental Requirements pursuant to Section 28 hereof in
good faith, and provided further, that the Lessee in all cases shall promptly
address any unreasonable risk to human health or the environment. At the request
of the Lessor or the Related Assignee during the Initial Term or any Extended
Term, the Lessee shall give periodic progress reports on its compliance efforts
and actions.
(D)The Lessee shall, no later than January 15 and July 15 of each
year following the date hereof, provide the Lessor and the Related Assignee with
a report describing the Environmental Events that have occurred during the
previous six months (but with respect to the first such report, that have
occurred since the date hereof), regardless of whether notice of such events was
given under subsection (A) of this paragraph (g)(vii) of Section 2(ii).
(cc) Information. The Lessee shall furnish to the Lessor and the
Related Assignee:
(i) all material written communications relating to any pending
or, to the best knowledge of the Lessee, threatened investigations, claims or
proceedings with respect to any Governmental Action or proposing to amend,
modify or affect any Governmental Action then required to be in effect; and
(ii) written notice of the occurrence of any event giving rise
(or that could reasonably be expected to give rise) to a claim under any
insurance policy maintained pursuant to the terms of this Lease in an amount
greater than $5,000,000 together with copies of any document relating thereto
(including copies of any such claim), in the possession or control of the
Lessee.
(dd) Post-Closing Conditions.
(i) As promptly as practicable but in no event later than two
hundred and forty (240) days following the Effective Date (the "Post-Closing
Period"), the Lessee shall:
(x) furnish to the Lessor and each Related Assignee true and correct
copies of all UCC search reports relating to the Facility;
(y) release or cause the release or termination of any Liens on or
otherwise affecting the Facility, other than Permitted Liens (without
reference to the last proviso to the definition of "Permitted Liens"); and
(z) deliver or cause to be delivered to the Lessor and each Related
Assignee such opinions of counsel to the Lessee and other documents or
instruments relating to the first priority of the Lien created under the
Financing Arrangements and the absence of any Liens on or otherwise
affecting the Facility, other than Permitted Liens (without reference to
the last proviso to the definition of "Permitted Liens"), each in form and
substance reasonably satisfactory to the Lessor and each Related Assignee,
as the Lessor or any Related Assignee shall request.
(ii) Not later than one hundred and eighty (180) days following
the Effective Date, the Lessee shall complete the undertakings set forth in
Exhibit J hereto.
(iii) Provided that the Lessee is proceeding diligently and in
good faith to satisfy its post-closing obligations under clause (i) of paragraph
(i) of this Section 2(ii), solely for the duration of the Post-Closing Period,
an Event of Default under paragraph (k) of Section 18 hereof shall be deemed not
to exist by virtue of operation of clause (i) of paragraph (i) of this Section
2(ii).
SECTION 3. LEASE OF THE FACILITY AND OTHER PROPERTY AND EQUIPMENT.
(a) Subject to the terms and conditions hereof, including without
limitation Section 5 hereof, the Lessor shall lease to the Lessee, and the
Lessee shall lease from the Lessor pursuant to this Lease, the Facility and any
other Parcel of Property or Unit of Equipment of the type described on Exhibit A
hereto, when and as the Lessee has need of such other Property or Equipment;
provided that, in the case of such other Property or Equipment:
(i) such Property or Equipment is available for purchase;
(ii) the Lessor has approved the purchase order or acquisition
with respect to such Equipment or the acquisition with respect to such Property
(which approval shall be in the sole discretion of the Lessor);
(iii) at the time any such Property or Equipment is to be ordered
or leased hereunder there exists no Event of Default or Potential Default; and
(iv) the sum of (A) the Acquisition Cost of such Property or
Equipment and (B) the aggregate Acquisition Cost of the Facility and all other
Property or Equipment leased hereunder at any time would not, at the time any
such Property or Equipment is to be leased hereunder, exceed such amount as the
Lessor, the Related Assignee and the Lessee may from time to time agree.
(b) The lease of the Facility and each other Parcel of Property or Unit
of Equipment to the Lessee under this Lease shall be evidenced by a Unit Leasing
Record. The Lessee shall prepare and execute a Unit Leasing Record with respect
to the Facility and each other Parcel of Property or Unit of Equipment (which
Unit Leasing Record may relate to more than one Parcel of Property or Unit of
Equipment) and deliver it promptly to the Lessor. Contemporaneously with the
payment required by paragraph (b) of Section 5 hereof, the Lessor shall execute
the acceptance of such Unit Leasing Record and promptly return one copy of such
Unit Leasing Record to the Lessee.
(c) The Lessee shall prepare each Unit Leasing Record pursuant to the
procedures provided by the Lessor. Each Unit Leasing Record shall give a full
description of the Facility or each Parcel of Property or Unit of Equipment
covered thereby, the Acquisition Cost of the Facility or each such Parcel or
Unit, the Lease Term for the Facility or each such Parcel or Unit and such other
details as the Lessor and the Lessee may from time to time agree.
(d) Execution by the Lessee of a Unit Leasing Record shall constitute
(i) acknowledgment by the Lessee that the Facility or other Property or
Equipment specified in such Unit Leasing Record has been delivered to the Lessee
in good condition and has been accepted for lease hereunder by the Lessee as of
the Effective Date, (ii) acknowledgment by the Lessee that the Facility or other
Property or Equipment specified in such Unit Leasing Record is subject to all of
the covenants, terms and conditions of this Lease, and (iii) certification by
the Lessee that the representations, warranties and covenants contained in
Section 2 of this Lease as they relate to the Lessee, the Guarantor and the
Facility or any other Property or Equipment specified in such Unit Leasing
Record, as applicable, are true and correct on and as of the Effective Date as
though made on and as of the Effective Date and that there exists on the
Effective Date no Event of Default or Potential Default.
SECTION 4. INTENT OF THE PARTIES; OPERATING LEASE.
(a) It is the intent of the Lessee and the Lessor that: (i) this Lease
constitutes an operating lease from the Lessor to the Lessee for purposes of the
Lessee's financial reporting, (ii) this Lease and other transactions
contemplated hereby preserve the ownership of the Facility and any other
Property or Equipment in the Lessee for federal, state and local income tax and
bankruptcy purposes, and (iii) this Lease grants to the Lessor a Lien on the
Facility. The Lessee and the Lessor agree that the Lessor shall be deemed to
have a valid and binding security interest in and Lien on the Facility and all
other Property and Equipment, free and clear of all Liens, other than Permitted
Liens, as security for the obligations of the Lessee under this Lease (it being
understood and agreed that the Lessee does hereby grant a Lien, and convey,
transfer, assign, mortgage and warrant to the Lessor and its successors,
transferees and assigns, for the benefit of the Lessor and its successors,
transferees and assigns, on the Facility and all other Property and Equipment
and any proceeds or products thereof, to have and hold the same as collateral
security for the payment and performance of the obligations of the Lessee under
this Lease).
(b) Specifically, without limiting the generality of paragraph (a) of
this Section 4, the Lessee and the Lessor intend and agree that in the event of
any insolvency or receivership proceedings or a petition under the United States
bankruptcy laws or any other applicable insolvency laws or statute of the United
States of America or any State thereof affecting the Lessee, the Lessor, any
Related Assignee or any collection actions relating thereto, the transactions
evidenced by this Lease shall be regarded as loans made by the Lessor to the
Lessee.
(c) LIC Capital, Inc., the general partner of the Lessor, has been
incorporated as a close corporation under the laws of the State of Delaware by
an individual completely unaffiliated with the Lessee. Such individual and all
the officers and directors of LIC Capital, Inc., have the full power, authority
and legal right to direct the management and operations of the Lessor. The
Lessor has been formed as a limited partnership under the laws of the State of
Delaware by LIC Capital, Inc., and is not directly or indirectly affiliated with
the Lessee. The Lessee did not participate in the incorporation of LIC Capital,
Inc. or the formation of the Lessor.
SECTION 5. DELIVERY; ABSOLUTE OBLIGATION.
(a) The Lessee shall acquire or order and accept the Facility and any
other Parcel of Property or Unit of Equipment pursuant to the procedures
provided by the Lessor. The Lessor shall not be liable to the Lessee for any
failure to obtain, or delay in obtaining, the Facility or any other Property or
Equipment or any delay in the delivery of title to the Lessor or possession of
the Facility or such other Property or Equipment to the Lessee.
(b) The Lessor's acceptance for lease of the Facility or any other
Parcel of Property or Unit of Equipment by the Lessee and the Lessor is subject
to receipt by the Lessor, in the case of Property and Equipment (other than the
Facility), at least seven (7) business days prior to the requested acquisition,
and, in the case of the Facility, prior to the requested acquisition, of:
(i) in the case of a Unit of Equipment, the vendor's invoice or
invoices and, if required by the Lessor and the Related Assignee, a bill of
sale, for such Unit of Equipment (in the case of the Facility and the Facility
Assets, the Purchase Agreement Assignment), and in the case of a Parcel of
Property, the executed contract of sale and deed with respect to each fee
interest in such Parcel of Property (or with respect to a leasehold interest in
a Parcel of Property, the executed Ground Lease or with respect to the leasehold
interest in the Facility, the executed Site Lease), and such estoppel
certificates, consents, recognition and attornment agreements and confirmation
of customary mortgagee protection as are reasonably acceptable to the Lessor and
the Related Assignee);
(ii) invoices or other evidence satisfactory to the Lessor for
any amounts included in the Acquisition Cost of such Parcel or Unit payable to
parties other than the vendor;
(iii) invoices or other evidence satisfactory to the Lessor for
any amounts included in the Acquisition Cost of such Parcel or Unit that have
been paid to the vendor or other parties by the Lessee and for any costs
included in the Acquisition Cost of such Parcel or Unit incurred by the Lessee;
(iv) with respect to the Facility, the Additional Property and
each other Parcel of Property, a current appraisal in form and substance
acceptable and addressed to the Lessor and each Related Assignee from the
Appraiser or another independent appraiser with respect to the value of the
Facility, the Additional Property or such Property, as the case may be, at such
date and at the end of the Lease Term;
(v) with respect to the Facility, the Additional Property and
each other Parcel of Property, a satisfactory Environmental Report, it being
expressly agreed that the Lessor or any Related Assignee shall have the right to
require a supplemental or additional environmental study if the Lessor or any
Related Assignee reasonably requires additional assurance or information as to
any matter contained or not addressed in such Environmental Report, and with
respect to any other Property or Equipment, such environmental information and
certifications as the Lessor or any Related Assignee shall reasonably request;
(vi) with respect to the Facility and the Additional Property, a
current as-built survey in form and substance satisfactory to the Lessor and the
Related Assignee and, with respect to each other Parcel of Property, a current
as-built survey made in accordance with the minimum standard detail requirements
for land title surveys jointly established and adopted by the American Land
Title Association and the American Congress on Surveying and Mapping by a
licensed registered public land surveyor, showing the lines of all streets
abutting the Facility, the Additional Property or such Property and the width
thereof, all access and other easements appurtenant to or used in connection
with the Facility, the Additional Property (including the Easements) or such
Property, all roadways, paths, driveways, easements, encroachments, overhanging
projections, and similar encumbrances, whether recorded (and if so, reference to
the recording data), apparent from a physical inspection of the Facility or such
Property or otherwise known to the surveyor, and if the Property is described by
reference to a filed map, a legend relating the survey to such map, and a
certification whether the Facility or such Property is located in a flood zone;
(vii) the Acquisition Certificate;
(viii) other than in the case of the Facility, a reaffirmation of
the Guaranty by the Guarantor;
(ix) with respect to the Facility, an original executed deed and
a bill of sale with respect to the Facility Assets, an original of the Site
Lease, two original executed counterparts of a memorandum of such Site Lease and
of this Lease, in each case in statutory recordable form for the jurisdiction in
which the Facility is located, and an original executed counterpart of the
Purchase Agreement Assignment, and, with respect to each Parcel of Property
(other than the Facility), two original executed counterparts of a memorandum of
this Lease, an original of the deed or of the Ground Lease, as applicable, with
respect to each Parcel of Property (other than the Facility) pursuant to which
the interest of the Lessor in such Parcel of Property is created, in each case
in statutory recordable form for the jurisdiction in which such Parcel is
located;
(x) with respect to the Facility, the Additional Property and
each other Parcel of Property, a title insurance commitment from a title
insurance company satisfactory to the Lessor, subject to no title exceptions or
other matters other than those approved by the Lessor and the Related Assignee,
and committing to insure the Lessor's and the Related Assignee's interest in the
Facility and such Parcel of Property upon delivery to the title insurance
company of the title and financing documents to be recorded, and, except as
otherwise provided in Section 8(i) hereof or in the applicable Financing
Arrangements, the actual issuance and prompt delivery of such policies to the
Lessor and the Related Assignee;
(xi) two original executed counterparts of a Unit Leasing Record
with respect to the Facility or such other Parcel or Unit duly prepared and
executed by the Lessee;
(xii) accurate wiring instructions for all amounts to be paid by
the Lessor in connection with such acquisition;
(xiii) the report required under Section 10(f) hereof, together
with certificates of insurance or other evidence reasonably acceptable to the
Lessor and the Related Assignee certifying that (1) the insurance then carried
or maintained on the Facility, the Additional Property or such Parcel or Unit
complies with the requirements of Section 10 hereof and (2) the provisions of
Section 10 hereof are adequate and reasonable protection of the Lessor and the
Related Assignee;
(xiv) opinions of counsel for the Lessee, in form and substance
reasonably satisfactory to the Lessor and the Related Assignee;
(xv) an assignment of or security interest in Governmental
Actions needed for the equipping, maintenance, operation or use of the Facility
or such Parcel or Unit (or any part thereof), and heretofore obtained, or now
owned or held, by the Lessee to the extent that such Governmental Actions may be
assigned in accordance with applicable law;
(xvi) copies of each Material Contract, in each case certified by
a Responsible Officer of the Lessee to be true copies of the originals as
executed; and
(xvii) such other documentation as the Lessor or the Related
Assignee may reasonably require.
Upon receipt and approval of all documents required by the preceding
clauses, the Lessor shall (A) pay to such vendor the amount of the vendor's
invoice or invoices and/or the purchase price specified in the contract of sale
for such Parcel or Unit except to the extent previously paid by the Lessee, (B)
pay to such other parties such amounts payable, except to the extent previously
paid by the Lessee and (C) reimburse or pay to the Lessee for such amounts paid
to the vendor or other parties by the Lessee, for such costs incurred by the
Lessee and, if agreed between the Lessor and the Lessee, for the appraised value
of the Property or Equipment; provided, however, that in no event shall the sum
of all payments made pursuant to clauses (A), (B) and (C) above exceed the
Acquisition Cost of such Property or Equipment.
(c) The Lessee shall ensure that the installation or erection of any
Equipment is in accordance with the specifications and requirements of the
vendor thereof.
(d) The obligations of the Lessee to pay all amounts payable pursuant to
this Lease (including specifically and without limitation amounts payable under
Sections 7, 11, 12, 13, 14, 15, 16 and 29 hereof) shall be absolute and
unconditional under any and all circumstances of any character, and such amounts
shall be paid without notice, demand, defense, setoff, deduction or counterclaim
and without abatement, suspension, deferment, diminution or reduction of any
kind whatsoever, except as herein expressly otherwise provided. The obligation
of the Lessee to lease and pay Basic Rent, any Debt Yield-Maintenance Premium
and Additional Rent and any other amounts due hereunder for the Facility and for
any and all other Property or Equipment leased pursuant to this Lease and any
amounts payable upon the termination of this Lease or upon an Event of Loss, an
event of Taking or an Event of Lease Termination is without any warranty or
representation, express or implied, as to any matter whatsoever on the part of
the Lessor or any Related Assignee or any Affiliate of either, or anyone acting
on behalf of any of them.
THE LESSEE HAS SELECTED THE FACILITY AND SHALL SELECT ALL PROPERTY OR
EQUIPMENT ACQUIRED OR ORDERED ON THE BASIS OF ITS OWN JUDGMENT. NEITHER THE
LESSOR NOR ANY RELATED ASSIGNEE NOR ANY AFFILIATE OF EITHER, NOR ANYONE ACTING
ON BEHALF OF ANY OF THEM MAKES ANY REPRESENTATION OR WARRANTY OF ANY KIND
WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, AS TO THE SAFETY,
TITLE, CONDITION, QUALITY, QUANTITY, FITNESS FOR USE, MERCHANTABILITY,
CONFORMITY TO SPECIFICATION, OR ANY OTHER CHARACTERISTIC, OF THE FACILITY OR ANY
PROPERTY OR EQUIPMENT, OR AS TO WHETHER THE FACILITY OR SUCH PROPERTY OR
EQUIPMENT OR THE OWNERSHIP, USE, OCCUPANCY OR POSSESSION THEREOF COMPLIES WITH
ANY LAWS, RULES, REGULATIONS OR REQUIREMENTS OF ANY KIND.
AS BETWEEN THE LESSEE AND THE LESSOR, ANY RELATED ASSIGNEE OR ANY
INDEMNIFIED PERSON, THE LESSEE ASSUMES ALL RISKS AND WAIVES ANY AND ALL
DEFENSES, SET-OFFS, DEDUCTIONS, COUNTERCLAIMS (OR OTHER RIGHTS), EXISTING OR
FUTURE, AS TO THE LESSEE'S OBLIGATION TO PAY BASIC RENT AND ALL OTHER AMOUNTS
PAYABLE HEREUNDER, INCLUDING, WITHOUT LIMITATION, ANY RELATING TO:
(A)THE SAFETY, TITLE, CONDITION, QUALITY, QUANTITY, FITNESS FOR USE,
MERCHANTABILITY, CONFORMITY TO SPECIFICATION, OR ANY OTHER QUALITY OR
CHARACTERISTIC OF THE FACILITY OR ANY PROPERTY OR EQUIPMENT, LATENT OR NOT;
(B)ANY SET-OFF, COUNTERCLAIM, RECOUPMENT, ABATEMENT, DEFENSE OR
OTHER RIGHT WHICH THE LESSEE MAY HAVE AGAINST THE LESSOR, ANY RELATED ASSIGNEE
OR ANY INDEMNIFIED PERSON FOR ANY REASON WHATSOEVER ARISING OUT OF THIS OR ANY
OTHER TRANSACTION OR MATTER;
(C)ANY DEFECT IN TITLE OR OWNERSHIP OF THE FACILITY OR ANY
PROPERTY OR EQUIPMENT OR ANY TITLE ENCUMBRANCE NOW OR HEREAFTER EXISTING WITH
RESPECT TO THE FACILITY OR ANY PROPERTY OR EQUIPMENT;
(D)ANY FAILURE OR DELAY IN DELIVERY OR ANY LOSS, THEFT OR
DESTRUCTION OF, OR DAMAGE TO, THE FACILITY OR ANY PROPERTY OR EQUIPMENT, IN
WHOLE OR IN PART, OR CESSATION OF THE USE OR POSSESSION OF THE FACILITY OR ANY
PROPERTY OR EQUIPMENT BY THE LESSEE FOR ANY REASON WHATSOEVER AND OF WHATEVER
DURATION, OR ANY CONDEMNATION, CONFISCATION, REQUISITION, SEIZURE, PURCHASE,
TAKING OR FORFEITURE OF THE FACILITY OR ANY PROPERTY OR EQUIPMENT, IN WHOLE OR
IN PART;
(E)ANY INABILITY OR ILLEGALITY WITH RESPECT TO THE USE, OWNERSHIP,
OCCUPANCY OR POSSESSION OF THE FACILITY OR ANY PROPERTY OR EQUIPMENT BY THE
LESSEE;
(F)ANY INSOLVENCY, BANKRUPTCY, REORGANIZATION OR SIMILAR PROCEEDING BY OR
AGAINST THE LESSEE OR THE LESSOR OR ANY RELATED ASSIGNEE;
(G)ANY FAILURE TO OBTAIN, OR EXPIRATION, SUSPENSION OR OTHER TERMINATION
OF, OR INTERRUPTION TO, ANY REQUIRED LICENSES, PERMITS, CONSENTS,
AUTHORIZATIONS, APPROVALS OR OTHER LEGAL REQUIREMENTS;
(H)THE INVALIDITY OR UNENFORCEABILITY OF THIS LEASE OR ANY OTHER INFIRMITY
HEREIN OR ANY LACK OF POWER OR AUTHORITY OF THE LESSOR OR THE LESSEE TO ENTER
INTO THIS CONTRACT;
(I)THE INVALIDITY OR UNENFORCEABILITY OF ANY BILL OF SALE OF THE
FACILITY OR ANY PROPERTY OR EQUIPMENT EXECUTED IN CONNECTION WITH THIS LEASE OR
ANY OTHER INFIRMITY THEREIN OR LACK OF POWER OR AUTHORITY OF ANY PARTY THERETO
TO ENTER INTO SUCH BILL OF SALE; OR
(J)ANY OTHER CIRCUMSTANCES OR HAPPENING WHATSOEVER, WHETHER OR
NOT SIMILAR TO ANY OF THE FOREGOING.
THE LESSEE HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHTS WHICH IT MAY NOW HAVE OR WHICH AT ANY TIME HEREAFTER MAY BE
CONFERRED UPON IT, BY STATUTE OR OTHERWISE, TO TERMINATE, CANCEL, QUIT, RESCIND
OR SURRENDER THIS LEASE EXCEPT IN ACCORDANCE WITH THE EXPRESS TERMS HEREOF. Each
payment of Basic Rent, any Debt Yield-Maintenance Premium, Additional Rent and
any other amount due hereunder made by the Lessee shall be final, and the
Lessee, without waiving any other remedies it may have, will not seek or have
any right to recover all or any part of such payment from the Lessor or any
Related Assignee for any reason whatsoever.
(e) Notwithstanding any other provision contained in this Lease, it is
specifically understood and agreed that neither the Lessor nor any Related
Assignee nor any Affiliate of either, nor anyone acting on behalf of any of them
makes any warranties or representations or has any responsibility to disclose
any relevant information, or has any other responsibility or duty, nor, except
as set forth in Section 22 of this Lease, has the Lessor or any Related Assignee
or any Affiliate of either, or anyone acting on behalf of any of them made any
covenants or undertakings, as to the accounting treatment to be accorded the
Lessee or as to the U.S. Federal or any state income or any other tax
consequences, if any, to the Lessee as a result of or by virtue of the
transactions contemplated by this Lease.
SECTION 6. INITIAL TERM; EXTENDED TERM.
(a) The "Initial Term" with respect to the Facility or any other Parcel
of Property or Unit of Equipment leased hereunder shall commence on the
Effective Date set forth in the Unit Leasing Record for the Facility or such
Property or Equipment and shall continue through June 20, 2004, unless
terminated earlier pursuant to Section 12, 13, 14, 15, 16, 19 or 29 hereof.
(b) The "Extended Term" with respect to the Facility or any other Parcel
of Property or Unit of Equipment shall commence on the later of the Effective
Date set forth in the Unit Leasing Record with respect thereto and the first day
after the last day of the Initial Term of the Facility or such Parcel or Unit
and shall continue through June 20, 2009, unless terminated earlier pursuant to
Section 12, 13, 14, 15, 16, 19 or 29 hereof.
(c) Notwithstanding anything contained in this Section 6, the provisions
of Sections 10 and 11 hereof and paragraph (a) of Section 15 hereof shall apply
with respect to any Property or Equipment from the time such Property or
Equipment is ordered by the Lessee, with the approval of the Lessor, pursuant to
procedures supplied by the Lessor.
SECTION 7. RENT AND OTHER PAYMENTS.
(a) The Lessee hereby agrees to pay the Lessor on each Basic Rent
Payment Date, in immediately available funds, as provided in paragraph (e) of
this Section 7, Basic Rent for the semi-annual period (or part thereof) ending
in the month in which such Basic Rent Payment Date occurs (which semi-annual
periods shall end on June 20 and December 20 in each calendar year), with
respect to the Facility and each other Parcel of Property or Unit of Equipment;
provided that, if the Effective Date is on or after the Lease Rate Date in any
first semi-annual period of the Initial Term with respect to the Facility or
such Parcel or Unit, Basic Rent for such partial semi-annual period shall be
payable on the next succeeding Basic Rent Payment Date.
(b) The Lessor shall furnish to the Lessee on the 16th day of the
calendar month prior to each calendar month in which a Basic Rent Payment Date
falls the Semi-Annual Cost of Debt for such semi-annual period, or, if such day
is not a Business Day, on the next succeeding Business Day (the "Lease Rate
Date"). Prior to each Basic Rent Payment Date the Lessor shall furnish the
Lessee with a summary of the calculations of Basic Rent for such Basic Rent
Payment Date.
(c) The Lessee hereby agrees to pay on demand all amounts (other than
Basic Rent) payable hereunder, including, without limitation, all amounts
payable to any Indemnified Person pursuant to Section 11 hereof.
(d) Without prejudice to the full exercise by the Lessor of its rights
under Sections 18 and 19 hereof, the Lessee shall pay to the Lessor from time to
time, on demand, as additional rent ("Additional Rent") (i) amounts required to
reimburse the Lessor for its obligations, costs and expenses (not previously
included in Basic Rent) incurred in acquiring, financing (including equity
financing and maintaining security for and exercising remedies in connection
with any such financing and costs incurred in connection with obligations of the
Lessor under or in respect of the Derivative Option) and leasing the Facility
and any other Property or Equipment (including, without limitation, all
obligations, costs and expenses of the Lessor arising in connection with the
termination of any Financing Arrangement (whether as a result of a default
thereunder or otherwise), all interest (including, without limitation, interest
at any default rate), the Debt Yield-Maintenance Premium and other costs, fees
and expenses incurred by the Lessor under any Financing Arrangement (including
any such accruing after the commencement of a bankruptcy or similar proceeding),
rent under the Site Lease and any other Ground Lease, amounts owing under any
other Operative Document and all obligations of the Lessor under or in respect
of any interest rate swap, cap, collar, option or other financial hedging
arrangement approved by the Lessee (such approval not to be unreasonably
withheld) and any amounts payable by the Lessor under any such arrangement to
reduce the notional amount thereof by the amount of any prepayment of any
borrowing to which such interest rate swap, cap, collar, option or other
financial hedging arrangement relates), and (ii) to the extent legally
enforceable, an amount computed by multiplying (A) all sums not paid by the
Lessee to the Lessor as provided in this Lease on or before the date such
payments are due, by (B) the decimal equivalent of the Semi-Annual Cost of Debt
as most recently furnished by the Lessor, and by (C) a fraction having a
numerator equal to the number of days in the period from but excluding such due
date to and including the date of payment thereof (provided that all full
calendar months during such period shall be computed on the basis of a 30-day
month) and a denominator of 360. The Lessee shall also pay to the Lessor on
demand an amount equal to any expenses incurred by the Lessor in collecting such
unpaid sums.
(e) Basic Rent, any Debt Yield-Maintenance Premium and Additional Rent
and any other amount payable by the Lessee to the Lessor shall be paid such that
immediately available funds in the full amount due are available on the date
due, to the account of the Lessor at such bank, or to such account of such other
Person at such bank, or otherwise as the Lessor may from time to time designate.
SECTION 8. RESTRICTED USE; COMPLIANCE WITH LAWS, FURTHER ASSURANCES.
(a) So long as no Event of Default shall have occurred and be
continuing, the Lessee may use the Facility and the Property or Equipment in the
regular course of its business for any lawful purpose, provided that the Lessee
agrees that the Facility will be used to produce and sell electric power. The
Lessee will not do or permit any act or thing which could reasonably be expected
to materially impair the value or usefulness of the Facility, the Additional
Property or any Parcel of Property or Unit of Equipment, except for ordinary
wear and tear resulting from the normal use thereof consistent with Prudent
Utility Practice.
(b) The Lessee shall promptly and duly execute, deliver and, subject to
paragraph (i) of this Section 8, file and record, at the Lessee's expense, all
such documents, statements, filings and registrations, and take such further
action, as the Lessor or the Related Assignee shall from time to time reasonably
request in order to establish, perfect and maintain the Lessor's title to and
interest in the Facility and any Property or Equipment and the Related
Assignee's interest in this Lease or in the Facility or any Property or
Equipment as against the Lessee or any third party in any applicable
jurisdiction. Equipment, machinery, apparatus, fixtures, structures and
installations may be substituted for portions of the Facility or the Additional
Property, as the case may be (other than Removable Improvements) if (i) the
Lessor and the Related Assignee consent to such substitution, such consent not
to be unreasonably withheld or denied or (ii) such substitution is performed by
the Lessee in the normal course of operating and maintaining the Facility or the
Additional Property and could not reasonably be expected to (x) materially
adversely affect the Lessee's ability to perform its obligations under any
Operative Document to which it is a party, (y) materially impair the value,
utility or remaining economic useful life of the Facility (assuming the Facility
is in the condition required hereby), or (z) result in an Event of Lease
Termination or an event described in clause (A), (B) or (C) of Section 15(c)
hereof. As equipment, machinery, apparatus, fixtures, structures and
installations are added to, or substituted for, Facility Assets (other than
Removable Improvements), title to such additional or substitute equipment,
machinery, apparatus, fixtures, structures and installations shall automatically
be transferred to the Lessor and such equipment, machinery, apparatus, fixtures,
structures and installations shall become Facility Assets and shall be subject
to this Lease and title to the existing equipment, machinery, apparatus,
fixtures, structures and installations which are being substituted for (other
than Removable Improvements) shall be released by the Lessor to the Lessee. The
Lessee may, so long as no Potential Default, Event of Default, Event of Loss or
Event of Lease Termination has occurred and is continuing, remove any Removable
Improvement in its entirety. "Removable Improvement", for the purposes hereof,
shall mean any part that (i) is in addition to, and not in replacement of or
substitution for (x) any part originally incorporated or installed in or
attached to the Facility on the Effective Date or (y) any part in replacement
of, or substitution for, any such part, (ii) is not required to be incorporated
or installed in or attached or added to the Facility pursuant to the terms of
any Operative Document or pursuant to applicable Legal Requirements and (iii)
can be removed from the Facility (x) without adversely affecting the ability of
the Facility to operate in accordance with the Operative Documents and (y)
without materially impairing the value, utility or remaining economic useful
life which the Facility would have had at such time had such part not been
incorporated or installed in or attached to the Facility (assuming the Facility
is in the condition required hereby). Upon the removal by the Lessee of any
Removable Improvement as provided in the immediately preceding two sentences,
title thereto shall, without further act, vest in the Lessee and such Removable
Improvement will no longer be deemed part of the Facility. Any Removable
Improvement not removed by the Lessee prior to the return of the Facility to the
Lessor hereunder shall remain the property of the Lessor. Nothing in this
Section 8(b) shall be deemed to prohibit the Lessee in the normal course of
operating and maintaining the Facility from substituting or adding equipment,
machinery, apparatus, fixtures, structures and installations which are not of
the same specifications or quality as the items being replaced or supplemented,
but only if such substitution or addition is consistent with Prudent Utility
Practice and could not reasonably be expected to result in an Event of Lease
Termination or an event described in clause (A), (B) or (C) of Section 15(c)
hereof. The Lessee may, after notice in writing to the Lessor and at the
Lessee's own cost and expense, change the place of principal location of any
Equipment other than Facility Assets. Notwithstanding the foregoing, no change
of location shall be undertaken (except for purposes of undertaking maintenance
or repairs to such Equipment or for temporary relocation of any Equipment to
premises in the State of New York owned or leased by the Lessee or an Affiliate
of the Lessee; provided that the Lessee delivers to the Lessor and the Related
Assignee an agreement of such owner or lessee acknowledging the respective
rights and interests of the Lessor and the Related Assignee in such Equipment)
unless and until all Legal Requirements shall have been met and the Lessee shall
have executed, delivered and filed or recorded all documents, statements,
filings and registrations as the Lessor or the Related Assignee shall reasonably
request in connection therewith. At least once each year prior to the
anniversary of the date of this Lease, and more frequently at the reasonable
request of the Lessor, the Lessee shall advise the Lessor and the Related
Assignee in writing where all Equipment leased hereunder as of such date is
principally located.
(c) The Lessee shall use all commercially reasonable precautions,
consistent with Prudent Utility Practice, to prevent loss or damage to the
Facility or any other Property or Equipment and to prevent injury to third
persons or property of third persons. The Lessee shall cooperate fully with the
Lessor and all insurance companies providing insurance pursuant to Section 10
hereof in the investigation and defense of any claims or suits arising from the
ownership or operation of any Equipment or ownership, use, or occupancy of the
Facility or any other Property; provided, that nothing contained in this
paragraph (c) shall be construed as imposing on the Lessor any duty to
investigate or defend any such claims or suits. The Facility, the Additional
Property and all other Property and Equipment shall comply, and the Lessee shall
comply and shall use its best efforts to cause all Persons using or operating
Equipment or using or occupying the Facility, the Additional Property or any
Property to comply, with all Insurance Requirements and Legal Requirements
applicable to the Facility, the Additional Property or such other Property or
Equipment and to the acquiring, titling, registering, leasing, insuring, using,
occupying, operating and disposing of the Facility, the Additional Property or
such other Property or Equipment, and the licensing of operators thereof, except
for any Legal Requirements the non-compliance with which, individually or in the
aggregate, would not (x) impair the ability of the Lessee to perform its
obligations under this Lease or the other Operative Documents to which it is a
party, (y) reasonably be expected to materially impair the ability of the
Facility or any other Turbine Unit, as the case may be, to perform in commercial
operation substantially at its Capacity or (z) reasonably be expected to result
in an Event of Lease Termination or an event described in clause (A), (B) or (C)
of Section 15(c) hereof.
(d) The Lessor and any Related Assignee or any authorized representative
of either may during reasonable business hours, and subject to compliance with
applicable safety procedures of the Lessee, from time to time inspect the
Facility, the Additional Property or any Property or Equipment and deeds,
registration certificates, certificates of title and related documents covering
the Facility, the Additional Property or such Property or Equipment wherever the
same may be located, but neither the Lessor nor any Related Assignee shall have
any duty to make any such inspection.
(e) The Lessee shall not, without the prior written consent of the
Lessor and the Related Assignee permit, or suffer to exist, any Lien, other than
Permitted Liens or those Liens placed thereon by, or arising from, the Lessor's
own actions, nor may it assign any right or interest herein or in the Facility
or any other Property or Equipment. The Lessee shall not relinquish possession
of the Facility or any Additional Property or any other Property or Equipment,
except to any contractor for use in performing repair work for the Lessee on the
Facility or such Property or Equipment; provided, that such relinquishment of
possession shall in no way affect the obligations of the Lessee or the rights of
the Lessor hereunder and with respect to the Facility or such Property or
Equipment. The Lessee may sublease the Facility or any Parcel of Property or
Unit of Equipment or lease any Additional Property; provided, that (A) the terms
of the instrument of sublease and the identity of the sublessee shall be subject
to the prior written approval of the Lessor and any Related Assignee, (B) each
such sublease shall expressly be made subject and subordinate to the provisions
hereof and shall, at the sole option of the Lessor and any Related Assignee, by
its terms be subject to termination upon the termination for any reason of this
Lease, (C) no such sublease shall modify or limit any right or power of the
Lessor or any Related Assignee hereunder or affect or reduce any obligation of
the Lessee hereunder, and all such obligations shall continue in full force and
effect as obligations of a principal and not of a guarantor or surety, as though
no such subletting had been made, and (D) any such sublease made otherwise than
as expressly permitted by this paragraph (e) shall be void and of no force and
effect. As additional security to the Lessor for the performance of the Lessee's
obligations under this Lease, the Lessee hereby assigns to the Lessor all of its
right, title and interest in and to all subleases permitted hereby and agrees to
cause any sublessee to enter into attornment agreements with the Lessor as the
Lessor or the Related Assignee shall request. The Lessor shall have the present
and continuing right to collect and enjoy all rents and other sums of money
payable under any such sublease, and the Lessee hereby irrevocably assigns such
rents and other sums to the Lessor for the benefit and protection of the Lessor;
provided, that unless a Potential Default or an Event of Default shall have
occurred and be continuing hereunder, the Lessee shall be entitled to collect
and enjoy such rents and other sums. The Lessee shall, within thirty (30) days
after the execution of any such sublease, deliver a conformed copy thereof to
the Lessor and the Related Assignee. Nothing contained in this Lease shall be
construed as constituting the consent or request of the Lessor, express or
implied, to or for the performance by any contractor, laborer, materialman or
vendor of any labor or services or for the furnishing of any materials for any
construction, alteration, addition, repair or demolition of or to the Facility
or any Property or Equipment or any part thereof. Notice is hereby given that
the Lessor will not be liable for any labor, services or materials furnished or
to be furnished to the Lessee, or to anyone holding the Facility or any Property
or Equipment or any part thereof through or under the Lessee, and that no
mechanics' or other liens for any such labor, services or materials shall attach
to or affect the interest of the Lessor in and to the Facility or any Property
or Equipment.
(f) Upon the reasonable request of the Lessor or the Related Assignee,
the Lessee shall affix or cause to be affixed to each Unit of Equipment, in the
place designated by the Lessor or such Related Assignee (or, if no such place
shall have been designated, in a prominent place), labels, plates or other
markings stating that such Unit of Equipment is owned by the Lessor. The Lessee
shall not without the prior permission of the Lessor or such Related Assignee
change or remove (or permit to be changed or removed or otherwise permit a
decrease in the visibility of) any insignia or lettering which is on any
Equipment at the time of delivery thereof or which is thereafter placed thereon
indicating the Lessor's ownership thereof.
(g) If any Lien or charge of any kind or any judgment, decree or order
of any court or other Governmental Authority (including, without limitation, any
state or local tax lien affecting the Facility, the Additional Property or any
Property or Equipment), whether or not valid, shall be asserted or entered which
could reasonably be expected to interfere with the due and timely payment of any
sum payable or the exercise of any of the rights or the performance of any of
the duties or responsibilities under this Lease, the Lessee shall, upon
obtaining knowledge thereof or upon receipt of notice to that effect from the
Lessor, promptly take such action as may be necessary to prevent or terminate
such interference.
(h) (A) The Lessee shall not take any action which (x) would cause the
Facility or any Turbine Unit to cease to be an "eligible facility" within the
meaning of Section 32(a)(2) of the 1935 Act or (y) would cause the Lessor to
cease to be an EWG under the 1935 Act, and (B) the Lessee shall at its own
expense take all actions as may from time to time be necessary so that neither
the Lessor, any Related Assignee nor any of their respective Affiliates will
(other than in connection with a Possessory Remedy), solely as a result of (i)
entering into this Lease or any other document contemplated hereby, (ii) the
acquisition, ownership, leasing or financing of the Facility or any Turbine Unit
(or any part thereof) or (iii) the operation by the Lessee or any Affiliate of
the Lessee of the Facility or any Turbine Unit in accordance with and as
contemplated by the Material Contracts and this Lease be deemed to be, and be
subject to financial, rate, utility or other similar regulation as, a public
utility, an electric utility or a public utility holding company under any Legal
Requirement, and the Lessee shall promptly and duly prepare and, if necessary,
execute and file, and prepare for execution and filing by the Lessor or any
Affiliate of the Lessor, such notices, applications and other documents as shall
be necessary so that the Lessor, each Related Assignee and each of their
respective Affiliates, as the case may be, shall be free of all such regulation.
The Lessor shall reasonably cooperate with the Lessee in connection with the
preparation, execution and filing of such notices, applications and other
documents as necessary for the Lessee to perform its obligations under this
Section 8(h).
(i) Upon the first to occur of (w) the Guarantor being rated less than
Baa3 by Moody's Investors Service, Inc. (or any successor agency) or less than
BBB- by Standard & Poor's Ratings Services (or any successor agency), (x) the
Lessee failing to pay any amount payable by the Lessee under this Lease and such
failure continuing for more than ten (10) days after notice thereof shall be
given to the Lessee by the Lessor or the Related Assignee, (y) the Guarantor's
Consolidated Net Worth falling below $1.6 billion or (z) the mortgage recording
tax due in connection with the recording of any Recordable Document (as
hereinafter defined) being eliminated or reduced to a rate that would result in
a mortgage recording tax equal to or less than $2 million or becoming
unenforceable in the City of New York, Queens County, New York State (each, a
"Recording Event"), (A) the Lessee shall within three (3) Business Days pay to
the Lessor the full amount of any filing fees, mortgage recording tax, transfer
and other taxes due in connection with the recording of the Recordable Documents
and cause to be provided, at its sole expense, a title insurance policy from a
title insurance company satisfactory to the Lessor and each Related Assignee,
subject to no title exceptions or other matters other than those approved by the
Lessor and each Related Assignee, and insuring the Lessor's and each Related
Assignee's interest in the Facility and any other Parcel of Property, (B) the
Lessor and the Lessee shall execute or cause to be executed the Recordable
Documents in recordable form, (C) within three (3) Business Days after receipt
from the Lessee of the filing fees, mortgage recording tax, transfer and other
taxes (or evidence satisfactory to the recording office that such taxes have
been paid) due in connection with the recording of the Recordable Documents, the
Lessor or the Related Assignee shall record or cause to be recorded, at the
Lessee's sole cost and expense, such instruments or documents , including
without limitation this Lease (or memorandum thereof), the Site Lease (or
memorandum thereof), the SNDA, the Landlord's Consent (each as defined in the
Note Purchase Agreement), any deed in respect of the Facility or any part
thereof, the Leasehold Mortgage and any security agreement, indenture, mortgage,
deed of trust, assignment of rents and any other instrument directly or
indirectly relating to the Lessor's financing of the Facility, including without
limitation Uniform Commercial Code financing statements related thereto
(collectively, the "Recordable Documents"), and (D) the Lessee shall deliver or
cause to be delivered to each Related Assignee such opinions of counsel relating
to the enforceability of the Recordable Documents and this Lease, each in form
and substance satisfactory to each Related Assignee, as any Related Assignee
shall request. The Related Assignee shall be entitled to record or cause to be
recorded, at its cost and expense, any of the Recordable Documents at any time
prior to a Recording Event; provided, that the Lessee shall not be liable to
indemnify or reimburse the Related Assignee under Section 11 or otherwise for
such mortgage recording tax until the occurrence of a Recording Event described
in clause (w), (x), (y) or (z) (in the case of a reduction and in such reduced
amount) of this Section 8(i). Nothing contained in this Section 8(i) shall be
deemed to limit the Lessee's indemnification obligations under Section 11 of
this Lease.
SECTION 9. MAINTENANCE, IMPROVEMENT AND REPAIR OF THE FACILITY, PROPERTY OR
EQUIPMENT.
(a) Upon the request of the Lessee, the Lessor will, so long as no Event
of Default or Event of Lease Termination shall have occurred and be continuing,
assign or otherwise make available to the Lessee any and all rights the Lessor
may have under any vendor's or manufacturer's warranties or undertakings with
respect to any equipment constituting a part of the Facility or any other
Property or Equipment.
(b) The Lessee shall pay all costs, expenses, fees and charges incurred
in connection with the ownership, use or occupancy of the Facility or any other
Parcel of Property or the ownership, use and operation of any other Unit of
Equipment. The Lessee shall operate and maintain the Facility and all other
Property and Equipment in accordance with Prudent Utility Practice. Except as
otherwise provided in Section 15 hereof, the Lessee shall at all times, at its
own expense, and subject to ordinary wear and tear, keep the Facility and all
other Property or Equipment in good operating order, repair and condition in
accordance with Prudent Utility Practice. Except as otherwise provided in
Section 15 hereof, the foregoing undertaking to maintain the Facility and all
other Property or Equipment in good repair shall apply regardless of the cause
necessitating repair and regardless of whether the Lessee has possession of the
Facility or such other Property or Equipment, and as between the Lessor and the
Lessee all risks of damage to the Facility and all other Property or Equipment
are assumed by the Lessee. With respect to the Facility or any other Parcel of
Property or Unit of Equipment, the undertaking to maintain in good repair shall
include, without limitation, all interior and exterior repairs required by
Prudent Utility Practice, whether structural or nonstructural, foreseen or
unforeseen, ordinary or extraordinary and all common area maintenance including,
without limitation, removal of dirt, snow, ice, rubbish and other obstructions
and maintenance of sidewalks and landscaping. In addition, the Lessee shall, at
its own expense, operate, service, maintain and repair the Facility and any
other Parcel of Property or Unit of Equipment and replace all necessary or
useful parts or components thereof, in each case in accordance with Prudent
Utility Practice, and such operating standards as shall be required to take
advantage of and enforce all available warranties to the extent such warranties
are material to the value or operation of the Facility and any other Parcel of
Property or Unit of Equipment.
(c) The Lessee shall pay: (i) all taxes (including mortgage recording
tax, transfer and other taxes pursuant to Section 8(i) hereof), assessments,
levies, fees, water and sewer rents and charges, and all other governmental
charges, general and special, ordinary and extraordinary, foreseen and
unforeseen, which are, at any time, imposed or levied upon or assessed against
(A) the Facility (including without limitation the tax lot or lots on which the
Facility Site is located, even if such tax lot or lots cover more property than
the Facility Site, and even if such tax lot or lots cover real property not
owned or leased by the Lessee), or any other Parcel or Unit, (B) any Basic Rent,
any Additional Rent or other sum payable hereunder or (C) this Lease, the
leasehold estate hereby created, the Recordable Documents, or which arises in
respect of the ownership, operation, occupancy, financing, possession or use of
the Facility or Parcel; (ii) all gross receipts or similar taxes (i.e., taxes
based upon gross income which fail to take into account all customary
deductions) (e.g., ordinary operating expenses, depreciation and interest)
relating to the Facility or any other Parcel or Unit imposed or levied upon,
assessed against or measured by any Basic Rent, or any Additional Rent or other
sum payable hereunder; (iii) all sales, value added, use and similar taxes at
any time levied, assessed or payable on account of the acquisition, leasing or
use of the Facility or any other Parcel or Unit; and (iv) all charges of
utilities and communications services serving the Facility or any other Parcel
or Unit. The Lessee shall not be required to pay any franchise, estate,
inheritance, income or similar tax of the Lessor (other than any tax referred to
in clause (ii) above unless such tax is imposed in lieu of an income or
franchise tax) unless such tax is imposed, levied or assessed in substitution
for any other tax, assessment, charge or levy which the Lessee is required to
pay pursuant to this paragraph (c); provided, however, that if at any time
during the term of this Lease, the method of taxation shall be such that there
shall be levied, assessed or imposed on the Lessor a capital levy or other tax
directly on the rents received therefrom, or upon the value of the Facility or
any other Parcel or Unit or any present or any future improvement or
improvements on the Facility or any other Parcel or Unit, then all such taxes,
assessments, levies or charges or the part thereof so measured or based, shall
be payable by the Lessee, and the Lessee shall pay and discharge the same as
herein provided. The Lessee will furnish to the Lessor, promptly after demand
therefor, proof of payment of all items referred to above which are payable by
the Lessee. If any such assessments may legally be paid in installments, the
Lessee may pay such assessment in installments. The Lessee will pay and
discharge, or cause to be paid and discharged, all taxes, assessments and
governmental charges or levies imposed upon it or its income or properties,
prior to the date on which penalties attach thereto, except to the extent that
any such tax, assessment, governmental charge or levy is the subject of a
Permitted Contest.
(d) Any improvements or additions to any Equipment shall become and
remain the property of the Lessor, except that any addition to Equipment made by
the Lessee shall remain the property of the Lessee if it can be removed from
such Equipment without impairing the functioning of such Equipment or its resale
value, excluding such addition. Subject to the provisions of Section 8(b)
hereof, any improvements or additions which do not remain property of the Lessee
shall be evidenced by a revised Unit Leasing Record.
(e) So long as no Event of Default or Event of Lease Termination shall
have occurred and be continuing, the Lessee may, at its expense, make additions
to and alterations to the Facility (including the Facility Assets), the
Additional Property or any other Parcel of Property; provided, that upon
completion of such additions or alterations (or within a reasonable period of
time thereafter, consistent with Prudent Utility Practice) (i) neither the fair
market value of the Facility or such Parcel of Property shall be materially
lessened thereby nor the condition of the Facility or such Parcel of Property
materially impaired below the value, utility or condition thereof immediately
prior to such action (assuming the Facility or such Parcel was then of a
condition and repair required to be maintained pursuant to paragraph (b) of
Section 9 hereof), (ii) such additions or alterations shall not result in a
change of use of the Facility, the Additional Property or such Parcel, (iii)
such work shall be completed in accordance with Prudent Utility Practice and in
compliance with all applicable Legal Requirements in all material respects and
all Insurance Requirements, (iv) such work could not reasonably be expected to
result in an Event of Lease Termination or an event described in clause (A), (B)
or (C) of Section 15(c) hereof, (v) in the case of the Facility, the Facility
will be capable of producing electricity substantially at or above the level of
its capability prior to the undertaking of such additions and alterations and
the Lessee will be able to fully perform its obligations under this Lease and
the other Operative Documents to which it is a party and (vi) no exterior walls
of any building or other improvement constituting a part of the Facility or
Parcel shall be demolished unless (A) the Lessee has made adequate provision
according to nationally recognized sound and prudent engineering and
architectural standards to preserve and maintain the structural integrity of the
Facility or such Parcel and for the restoration of the Facility or such Parcel
to a structurally sound architectural whole and (B) if such addition or
alteration costs more than $10,000,000 with respect to the Facility or any such
Parcel, the obligations of the Lessee to preserve, maintain and restore are
bonded, for the benefit of the Lessor and the Related Assignee and in an amount
not less than one hundred percent (100%) of the amount reasonably estimated by
an independent qualified architect licensed in New York, or a contractor of
recognized standing and reputation, to be necessary to accomplish such
preservation, maintenance and restoration, by a nationally recognized insurance
company rated in one of the two highest categories by the then current Best
Insurance Reports (or if such is no longer published, a similar insurance
industry standard publication) or otherwise reasonably assured to the Lessor's
satisfaction. Any and all such additions and alterations shall be and remain
part of the Facility or such Parcel and shall be subject to this Lease.
(f) Except as otherwise provided in Section 15 hereof, the Facility and
any other Property or Equipment shall be maintained, repaired, refurbished or
replaced by the Lessee when necessary in order to ensure that the Facility and
such Property or Equipment or replacements for any Property or Equipment leased
hereunder are of the kind, quality and in the quantities included in the Unit
Leasing Record (provided that the Lessee may replace any Property or Equipment
leased hereunder with equipment, machinery, apparatus, fixtures, structures and
installations of different kind, quality and in different quantities if such
replacement equipment, machinery, apparatus, fixtures, structures and
installations is consistent with Prudent Utility Practice and would not, in the
Lessee's good faith judgment, diminish in any material respect the value of the
Facility or such Property or Equipment) will be in such condition and sufficient
to allow the Facility and any other Property or Equipment to be operated in
accordance with Prudent Utility Practice and any other standards required by
this Lease. The Lessee shall comply in all material respects with all applicable
Federal, state and local laws and regulations relating to the records of the
Facility, the Additional Property or such Property or Equipment, as the case may
be. The Lessee shall obtain or cause to be obtained in a timely manner and
maintain or cause to be maintained in full force and effect all Governmental
Actions (other than those which, if not obtained or effected, would not,
individually or in the aggregate, (x) impair the ability of the Lessee to
perform its obligations under this Lease or the other Operative Documents to
which it is a party, (y) reasonably be expected to materially impair the ability
of the Facility or any other Turbine Unit, as the case may be, to perform in
commercial operation and to operate substantially at its Capacity or (z) result
in an Event of Lease Termination or an event described in clause (A), (B) or (C)
of Section 15(c) hereof) required for the ownership, leasing, operation and
maintenance of the Facility and any other Property or Equipment (including,
without limitation, any Turbine Unit or any part thereof) in accordance with and
as contemplated by the Facility Support Agreement and this Lease and as
otherwise necessary to perform its obligations under the Facility Support
Agreement and this Lease and will promptly upon the request of the Lessor or the
Related Assignee provide a copy of each such Governmental Action to the Lessor
and the Related Assignee. The Lessee shall obtain and maintain, or cause to be
obtained and maintained, all patents, licenses and proprietary rights and
technology that are necessary in connection with the acquisition, operation and
maintenance of the Facility, the Additional Property and any other Property or
Equipment (including, without limitation, any Turbine Unit or any part thereof).
SECTION 10. INSURANCE.
(a) The Lessee shall procure at its own cost and expense and maintain,
or cause to be procured and maintained, in full force and effect at all times
throughout the term of this Lease with respect to the Facility, the Additional
Property and all other Property and Equipment, insurance policies with
responsible insurance companies authorized to do business in the State of New
York with a Best Insurance Reports rating of "A" or better and a financial size
category of "VIII" or higher, or if not rated by Best, a Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc. claims paying
ability rating of BBB+ or higher (or such other company acceptable to the Lessor
and the Related Assignee), with limits and coverage provisions sufficient to
satisfy the requirements (if any) set forth in the Material Contracts, but in no
event less than the limits and coverage provisions set forth below:
(i) Workers' Compensation Insurance. Workers' compensation
insurance in accordance with and as required under the laws of the State of New
York. A maximum deductible or self-insured retention of $1,000,000 per
occurrence shall be allowed.
(ii) Employer's Liability Insurance. Employer's liability
insurance, if the Lessee has any employees, providing compensation for
occupational diseases and for injuries sustained by or death resulting to
employees of the Lessee or its subcontractors as required by law, including the
laws of each state wherein any work is performed under the Lease and where
employment contracts of such employees were made, including employer's liability
insurance coverage with a $10,000,000 minimum limit per accident. A maximum
deductible or self-insured retention of $1,000,000 per occurrence shall be
allowed.
(iii) General Liability Insurance. Liability insurance on an
occurrence (or claims-made form) basis against claims for personal injury
(including bodily injury and death) and property damage. Such insurance shall
provide coverage for products-completed operations, blanket contractual,
explosion, collapse and underground coverage, broad form property damage,
personal injury insurance, and the hostile fire exception to the pollution
liability exclusion with a $5,000,000 minimum limit per occurrence for combined
bodily injury and property damage. A maximum deductible or self-insured
retention of $5,000,000 per occurrence shall be allowed.
(iv) Automobile Liability Insurance. Automobile liability
insurance against claims for personal injury (including bodily injury and death)
and property damage covering all owned, leased non-owned and hired motor
vehicles, including loading and unloading, with a $5,000,000 minimum limit per
occurrence for combined bodily injury and property damage and containing
appropriate no-fault insurance provisions wherever applicable. A maximum
deductible or self-insured retention of $5,000,000 per occurrence shall be
allowed.
(v) Excess Insurance. Excess liability insurance on an occurrence
(or claims-made form) basis covering claims in excess of the underlying
insurance described in the foregoing clauses (ii), (iii) and (iv), with a
$100,000,000 minimum limit per occurrence; provided, however, in the event the
available limit of liability is less than $50,000,000 due to claims against such
excess liability insurance, the Lessee shall purchase additional coverage so
that the available limit of liability under such excess liability insurance is
not less than $100,000,000.
The amounts of insurance required in the foregoing clauses (ii),
(iii), (iv) and this clause (v) may be satisfied by the Lessee purchasing
coverage in the amounts specified or by any combination of primary and excess
insurance, so long as the total amount of insurance meets the requirements
specified above.
(vi) Physical Damage Insurance to the Facility, the Additional
Property and any other Property. Property damage insurance on an "all risk"
basis, boiler and machinery insurance on a comprehensive basis (covering all
production machinery, including but not limited to pressure vessels, electrical
turbines, generators, transformers and other related equipment, motors, air
tanks, boilers, machinery, pressure piping or any other similar objects)
including coverage against damage or loss caused by earth movement (including
but not limited to earthquake, landslide, subsidence and volcanic eruption)
fire, lightning and flood and providing coverage for (1) the Facility, the
Additional Property and each Parcel of Property in an amount equal to the
greater of (A) one hundred percent (100%) of the "full insurable replacement
value" of the Facility or such Parcel or (B) the Acquisition Cost of the
Facility or such Parcel, (2) transit including ocean marine transit, if
applicable, with sub-limits of $5,000,000, (3) foundations and other property
below the surface of the ground and (4) attorneys' fees, engineering and other
consulting costs, and permit fees directly incurred in order to repair or
replace damaged insured property in a minimum amount of $1,000,000. For purposes
of this clause (vi) and clause (vii), "full insurable replacement value" shall
mean the full replacement value of the Facility or any Parcel of Property
including any improvements, equipment, spare parts, fuel and supplies, without
deduction for physical depreciation and/or obsolescence. All such insurance may
have deductibles of not greater than $5,000,000 per occurrence. Such insurance
shall (x) not include any coinsurance provision, (y) provide for increased cost
of construction and loss to undamaged property as the result of enforcement of
building laws or ordinances with sub-limits not less than 10% of the "full
insurable replacement value" of the Facility, the Additional Property or such
other Parcel, and (z) include debris removal with sub-limits not less than
$1,000,000 or 25% of the loss, whichever is greater. The earth movement and
flood coverage may be of the type usually carried by corporations engaged in the
same or similar business, similarly situated with the Lessee or its Affiliates,
and owning or operating similar equipment and which cover risks of the kind
customarily insured against by such corporations, and in substantially the
amount applicable to similar equipment owned, leased or held by the Lessee or
its Affiliates. The property damage coverage shall not contain an exclusion for
freezing, mechanical breakdown, loss or damage covered under any guarantee or
warranty, or resultant damage caused by faulty workmanship, design or materials.
If the insurance company providing the physical damage insurance
is different from the insurance company providing the boiler and machinery
insurance required in this Section 10, then a joint loss agreement between such
companies will be required and included as part of the respective policies.
(vii) Physical Damage Insurance to Equipment. Physical damage
insurance with respect to all Equipment (other than any Equipment which is part
of the Facility), which is of the type usually carried by corporations engaged
in the same or similar business, similarly situated with the Lessee or its
Affiliates, and owning or operating similar equipment and which cover risks of
the kind customarily insured against by such corporations, and in substantially
the amount applicable to similar equipment owned, leased or held by the Lessee
or its Affiliates; provided, that such insurance shall at all times be in a
minimum aggregate amount not less than the Acquisition Cost of such Equipment.
(b) Endorsements. All policies of insurance required by this Section 10
shall provide for waivers of subrogation by the insurers in favor of the Lessor,
Merrill Lynch, Merrill Leasing, the general partner of the Lessor and its
shareholders, officers and directors, the limited partners of the Lessor and the
Related Assignee and their respective officers, directors, members, trustees and
employees.
All policies of liability insurance required to be maintained by
the Lessee under clauses (a)(iii), (iv) and (v) of this Section 10 shall
be endorsed as follows:
(1) To provide a severability of interest or cross liability
clause;
(2) Such that the insurance shall be primary and not excess to
or contributing with any insurance or self-insurance
maintained by the Lessor, Merrill Lynch, Merrill Leasing,
the general partner of the Lessor and its shareholders,
officers and directors, the limited partners of the Lessor
or the Related Assignee; and
(3) To name the Lessor, Merrill Lynch, Merrill Leasing, the
general partner of the Lessor and its shareholders,
officers and directors, the limited partners of the Lessor
and the Related Assignee and their respective officers,
directors, members, trustees and employees as additional
insureds.
All policies of insurance required to be maintained by the Lessee under
clauses (a)(vi) and (vii) of this Section 10 shall name the Related Assignee as
a loss payee and (subject to the provisions of clause (d)(ii) of this Section
10) shall name the Lessor, Merrill Lynch, Merrill Leasing, the general partner
of the Lessor and its shareholders, officers and directors, the limited partners
of the Lessor and their respective officers and employees as additional loss
payees, as their respective interests in the Facility or any other Property or
Equipment may appear.
(c) Waiver of Subrogation. The Lessee hereby waives any and all claims
for recovery from the Lessor, Merrill Lynch, Merrill Leasing, the general
partner of the Lessor and its shareholders, officers and directors, the limited
partners of the Lessor and the Related Assignee and their respective officers,
directors, members, trustees and employees for any and all loss or damage
covered by any of the insurance policies to be maintained under this Lease to
the extent that such loss or damage is recovered under any such policy. Inasmuch
as the foregoing waiver will preclude the assignment of any such claim to the
extent of such recovery, by subrogation (or otherwise), to an insurance company
(or other Person), the Lessee shall give written notice of the terms of such
waiver to each insurance company which has issued, or which may issue in the
future, any such policy of insurance (if such notice is required by the
insurance policy) and shall cause each such insurance policy to be properly
endorsed by the issuer thereof, or to otherwise contain one or more provisions
that prevent the invalidation of the insurance coverage provided thereunder by
reason of such waiver.
(d) Additional Requirements.
(i) The Lessee shall promptly notify the Lessor and each Related
Assignee of any loss in excess of $5,000,000 covered by any insurance maintained
pursuant to clauses (a)(vi) and (vii) of this Section 10.
(ii) All policies of insurance required to be maintained pursuant
to clauses (a)(vi) and (vii) of this Section 10 shall provide that the proceeds
of such policies shall be payable solely to the Related Assignee pursuant to a
standard first mortgage endorsement substantially equivalent to the Lenders Loss
Payable Endorsement 438BFU or ISO endorsement CP12181091, without contribution.
The Lessor and the Related Assignee shall have the right to join the Lessee in
adjusting any loss in excess of $5,000,000. All policies (other than in respect
to liability or workers compensation insurance) shall insure the interests of
the Lessor, Merrill Lynch, Merrill Leasing, the general partner of the Lessor,
the limited partners of the Lessor and the Related Assignee regardless of any
breach or violation by the Lessee or Lessor of any warranties, declarations or
conditions contained in such policies, any action or inaction of the Lessee or
the Lessor or others, or any foreclosure relating to the Facility, the
Additional Property or any other Parcel of Property or Unit of Equipment or any
change in ownership of all or any portion of the Facility or such other Parcel
or Unit.
(iii) A loss under any insurance required to be carried under
clauses (a)(vi) or (vii) of this Section 10 shall be adjusted with the insurance
companies, including the filing in a timely manner of appropriate proceedings by
the Lessee, subject to the approval of the Lessor and the Related Assignee if
such loss is in excess of $5,000,000. In addition the Lessee may in its
reasonable judgment consent to the settlement of any loss; provided that, in the
event that the amount of the loss exceeds $5,000,000, the terms of such
settlement shall be consented to by the Lessor and the Related Assignee.
(iv) All policies of insurance required to be maintained pursuant
to paragraph (a) of this Section 10 shall be endorsed so that if at any time
they should be canceled, or coverage shall be reduced in a manner which
adversely affects the interests of the Lessor, Merrill Lynch, Merrill Leasing,
the general partner of the Lessor, the limited partners of the Lessor or the
Related Assignee, such cancellation or reductions shall not be effective as to
the Lessor, Merrill Lynch, Merrill Leasing, the general partner of the Lessor,
officers and directors, the limited partners of the Lessor and the Related
Assignee until sixty (60) days (except for non-payment of any premium, which
shall be for ten (10) days), after receipt by the Lessor and the Related
Assignee of written notice from such insurer of such cancellation or reduction.
(v) The Lessee may, at its own cost and expense, prosecute any
claim against any insurer or contest any settlement proposed by any insurer, and
the Lessee may bring any such prosecution or contest in the name of the Lessor,
the Lessee, or both, and the Lessor will join therein at the Lessee's request,
provided that the Lessee shall indemnify the Lessor against any losses, costs or
expenses (including reasonable attorneys' fees) which the Lessor may incur in
connection with such prosecution or contest.
(e) Evidence of Insurance. On the date of this Lease with respect to the
Facility and the Additional Property, on the Effective Date with respect to any
other Property or Equipment and on an annual basis at least ten (10) days prior
to each policy anniversary, the Lessee shall furnish the Lessor and each Related
Assignee with (i) approved certification of all insurance required under this
Section 10 and (ii) a schedule of the insurance policies held by or for the
benefit of the Lessee and required to be in force by the provisions of paragraph
(a) of this Section 10. Such certification shall be executed by each insurer or
by an authorized representative of each insurer where it is not practical for
such insurer to execute the certificate itself. Such certification shall
identify underwriters, the type of insurance, the insurance limits and the
policy term and shall specifically list the special provisions enumerated for
such insurance required by paragraph (a) of this Section 10. Upon request, the
Lessee will promptly furnish the Lessor and each Related Assignee with copies of
all insurance policies, binders and cover notes or other evidence of such
insurance relating to the insurance required to be maintained by the Lessee. The
schedule of insurance shall include, to the extent such information is not
included on the insurance certificates, the name of the insurance company,
policy number, type of insurance, major limits of liability and expiration date
of the insurance policies.
(f) Reports. Upon the request of the Lessor or any Related Assignee,
concurrently with the furnishing of the certification referred to in paragraph
(e) above, the Lessee shall furnish the Lessor and such Related Assignee with a
report of an independent broker, signed by an officer of the broker, stating
that in the opinion of such broker, the insurance then carried or to be renewed
is in accordance with the terms of paragraphs (a), (b), (d) and (m) of this
Section 10 and attaching an updated copy of the schedule of insurance required
by paragraph (e) above. In addition, the Lessee will advise the Lessor and
Related Assignee in writing promptly of any default in the payment of any
premium and of any other act or omission on the part of the Lessee which may
invalidate or render unenforceable, in whole or in part, any insurance being
maintained by the Lessee pursuant to paragraph (a) of this Section 10.
(g) Failure to Maintain Insurance. In the event the Lessee fails to
maintain the full insurance coverage required by paragraph (a) of this Section
10, the Lessor or the Related Assignee, upon thirty (30) days' prior notice
(unless the aforementioned insurance would lapse within such period, in which
event notice should be given as soon as reasonably possible) to the Lessee of
any such failure, may (but shall not be obligated to) take out the required
policies of insurance and pay the premiums on the same.
(h) No Duty of the Lessor or the Related Assignee to Verify or Review.
No provision of this Section 10, or any provision of this Lease, shall impose on
the Lessor or the Related Assignee any duty or obligation to verify the
existence or adequacy of the insurance coverage maintained by the Lessee, nor
shall the Lessor or the Related Assignee be responsible for any representations
or warranties made by or on behalf of the Lessee to any insurance company or
underwriter. Any failure on the part of the Lessor or the Related Assignee to
pursue or obtain the evidence of insurance required by this Lease from the
Lessee and/or failure of the Lessor or the Related Assignee to point out any
non-compliance of such evidence of insurance shall not constitute a waiver of
any of the insurance requirements in this Lease.
(i) Application of Insurance Proceeds for Loss or Taking. As between the
Lessor and the Lessee it is agreed that any insurance payments received as the
result of the occurrence of (i) any event of loss described in paragraph (c) of
Section 15 hereof with respect to the Facility or any other Parcel of Property
or Unit of Equipment, or (ii) any event of Taking described in paragraph (a) of
Section 16 hereof, shall be paid to an account of the Lessor established in
connection with the Facility or such Parcel or Unit, as the case may be, and
disposed of as set forth in paragraph (c) of Section 15 hereof.
(j) Application of Insurance Proceeds for Other than Loss or Taking. As
between the Lessor and the Lessee, so long as no Event of Default, Potential
Default under paragraphs (a), (d) or (h) of Section 18 hereof, Event of Loss or
Event of Lease Termination shall have occurred and be continuing, the insurance
proceeds of any property damage or loss to the Facility or any other Parcel of
Property or Unit of Equipment or any event of Taking described in paragraph (b)
of Section 16 hereof will be held in an account of the Lessor established in
connection with the Facility or such other Parcel or Unit, as the case may be,
and applied in payment (or to reimburse the Lessee) for repairs or replacement
in accordance with the terms of paragraph (b) of Section 15 hereof. The Lessee
shall be entitled, subject to its compliance with the immediately succeeding
sentence, (i) to receive the amounts so deposited against certificates, invoices
or bills satisfactory to the Lessor, delivered to the Lessor from time to time
as such work or repair progresses, and (ii) to direct the investment of the
amounts so deposited as provided in paragraph (k) of this Section 10. To the
extent that the Lessor estimates that the cost of such work or repair shall
exceed the amount of such proceeds, the Lessee shall make adequate provisions
for the payment thereof, which provisions shall be acceptable to the Lessor and
the Related Assignee. Any moneys remaining in the aforesaid account after final
payment for repairs has been made shall be paid to the Lessee.
(k) Investment. The Lessor, at the Lessee's instruction, shall invest
the amounts deposited with the Lessor pursuant to paragraph (j) of this Section
10 in any investments permitted under a Financing Arrangement. Such investments
shall mature in such amounts and on such dates so as to provide that amounts
shall be available on the draw dates sufficient to pay the amounts requested by
and due to the Lessee. Any interest earned on investments of such funds shall be
paid to the Lessee. The Lessor shall not be liable for any loss resulting from
the liquidation of each and every such investment and the Lessee shall bear the
risk of such loss, if any.
(l) Application in Default. Any amount referred to in paragraphs (i),
(j) or (k) of this Section 10 which is payable to the Lessee shall not be paid
to the Lessee or, if it has been previously paid to the Lessee, shall not be
retained by the Lessee, if at the time of such payment an Event of Default,
Potential Default under paragraphs (a), (d) or (h) of Section 18 hereof, Event
of Loss or Event of Lease Termination shall have occurred and be continuing. In
such event, all such amounts shall be paid to and held by the Lessor as security
for the obligations of the Lessee hereunder or, at the Lessor's option, applied
by the Lessor toward payment of any of such obligations of the Lessee at the
time due hereunder as the Lessor may elect. At such time as there shall not be
continuing any Event of Default, Potential Default under the paragraphs (a), (d)
or (h) of Section 18 hereof, Event of Loss or Event of Lease Termination, all
such amounts at the time held by the Lessor in excess of the amount, if any,
which the Lessor shall have elected to apply as above provided shall be paid to
the Lessee.
(m) "Claims Made" Policies for Certain Types of Insurance. If any
liability insurance required under the provisions of this Section 10 is allowed
to be written on a "claims made" basis, then such insurance shall include the
following:
(i) the retroactive date (as such term is specified in each of
such policies) shall be no later than the date of this Lease; and
(ii) each time any policy written on a "claims made" basis is not
renewed or the retroactive date of such policy is to be changed, the Lessee
shall obtain or cause to be obtained for each such policy or policies the
broadest extended reporting period coverage, or "tail" reasonably available in
the commercial insurance market for each such policy or policies, as determined
in the reasonable judgment of the Lessor and the Related Assignee, but in no
event less than two years after the expiration of such policy or policies.
(n) Use or Operation of the Facility, and other Property and Equipment.
The LESSEE covenants that it will not use or operate the Facility or any other
Equipment or use or occupy the Facility or any other Property or permit the use
or occupancy of the Facility or any other Property or the use or operation of
the Facility or any other Equipment at a time when the insurance required by
this Section 10 is not in force.
SECTION 11. INDEMNITIES.
(a) The Lessee shall indemnify, protect, defend and hold harmless the
Lessor, each general and limited partner of the Lessor, Merrill Lynch, Merrill
Leasing, each Related Assignee, and their respective successors or assigns, and
each Affiliate of each of them, and their respective officers, directors,
trustees, incorporators, shareholders, partners (general and limited, including,
without limitation, the general and limited partners of the Lessor), employees,
agents and servants (each of the foregoing an "Indemnified Person") from and
against all liabilities (including, without limitation, Environmental Damages
and strict liability in tort), taxes, losses, obligations, claims (including,
without limitation, Environmental Damages and strict liability in tort), damages
(including, without limitation, direct, indirect, consequential, special and
punitive damages payable to third parties), penalties, causes of action, suits,
costs and expenses (including, without limitation, attorneys', experts',
consultants' and accountants' fees and expenses) or judgments of any nature
relating to or in any way arising out of:
(i) the ordering, delivery, acquisition, purchase agreement for
the acquisition, construction, title on acquisition, rejection, installation,
possession, titling, retitling, registration, custody by the Lessee of title and
registration documents, ownership, use, non-use, misuse, lease under the Site
Lease or any Ground Lease, any Operative Document, financing including any
indentures related thereto (including, without limitation, all obligations of
the Lessor under or in respect of the Derivative Option and any interest rate
swap, cap, collar, option or other financial hedging arrangement and any amounts
payable by the Lessor under any such arrangement to reduce the notional amount
thereof by the amount of any prepayment of any borrowing to which such interest
rate swap, cap, collar, option or other financial hedging arrangement relates),
lease, sublease, security interest in, operation, transportation, repair or
control of the Facility, the Additional Property or any other Property or
Equipment leased or to be leased hereunder, (i) except to the extent that such
costs are included in the Acquisition Cost of the Facility, the Additional
Property or such other Property or Equipment or have been paid by the Lessee as
Basic Rent or Additional Rent, (ii) except for any general administrative
expenses of the Lessor, (iii) except the income taxes with respect to which
indemnification is excluded under paragraph (b) of this Section 11 and (iv)
except that this indemnity shall not duplicate any payment required to be made
by the Lessee pursuant to paragraph (b)(iii)(A) or (c)(iii)(A) of Section 12 of
this Lease;
(ii) the assertion of any claim or demand based upon any
infringement or alleged infringement of any patent or other right, by or in
respect of the Facility, the Additional Property or any other Property or
Equipment; provided, however, that, upon request of the Lessee, the Lessor will
make available to the Lessee the Lessor's rights under any similar
indemnification arising from any manufacturer's or vendor's warranties or
undertakings with respect to any equipment constituting a part of the Facility
or any other Property or Equipment;
(iii) any violation, or alleged violation, by the Lessee of this
Lease or of any other Operative Documents to which the Lessee is a party or of
any contracts or agreements to which the Lessee is a party or by which it is
bound or of any laws, rules, regulations, orders, writs, injunctions, decrees,
consents, approvals, exemptions, authorizations, licenses and withholdings of
objection, of any governmental or public body or authority and all other Legal
Requirements applicable to the Facility, the Additional Property or any other
Property or Equipment;
(iv) Environmental Damages relating to or in any way arising out
of the Facility, the Additional Property or any other Parcel of Property or Unit
of Equipment, including, without limitation:
A. any violation or alleged violation of, or
compliance or noncompliance with, any Environmental Requirements
(i) in connection with the ownership or operation of the
Facility, the Additional Property or any other Property or
Equipment or (ii) any prior owner or operator of the Facility
Site, the Additional Property or any other Property in connection
with the ownership or operation of the Facility Site, the
Additional Property or any other Property;
B. any Release or threatened Release at, to or from
any location of any Contaminants, or Remedial Action or
corrective action (as the latter term is used in Section 3004(u),
3004(v), and 3008(h) of the Resource Conservation and Recovery
Act or any equivalent state, local or foreign law) to address any
Contaminants, (i) generated, treated, recycled, stored,
processed, used or disposed by or on behalf of the Lessee at or
in connection with the Facility, the Additional Property or any
other Property or Equipment, (ii) generated, treated, recycled,
stored, processed, used or disposed by or on behalf of any prior
owner or operator of the Facility Site, the Additional Property
or any other Property in connection with the ownership or
operation of the Facility Site, the Additional Property or any
other Property, (iii) transported by or on behalf of the Lessee
or any other Person to or from the Facility, the Additional
Property or any other Property for treatment, recycling,
processing, use or disposal at any location, or (iv) removed by
any Person from any portion of the Facility, the Additional
Property or any other Property;
C. the presence of any Contaminant at, in, on or under the
Facility, the Additional Property or any other Property or
Equipment;
D. the failure to report, disclose or remediate any
of the foregoing or to comply with any applicable consent order
or voluntary agreement with any Governmental Authority relating
to any of the foregoing; and
E. allegations of any of the foregoing; and
(v) [intentionally omitted]
(vi) the failure for any reason, whether voluntary or
involuntary, by act or omission, and irrespective of whether or when a Recording
Event occurs, to have executed and recorded any Recordable Document in the
appropriate locations necessary to perfect the security interests created under,
or to transfer the real property interests conveyed by, the Recordable
Documents, as the case may be, at any time from the date of this Lease until the
repayment in full by the Lessor of all obligations outstanding under any
Financing Arrangement.
(b) The Lessee agrees to indemnify, protect, defend and hold harmless
each Indemnified Person for matters arising from and against all U.S. Federal,
state, county, municipal, foreign or other fees and taxes of whatsoever nature,
including, but not limited to, license, qualification, franchise, rental,
withholding, sales, use, net income, gross income, gross receipts, ad valorem,
business, personal property, real estate, value added, excise, motor vehicle,
occupation fees and stamp or other taxes or tolls of any nature whatsoever, and
penalties and interest thereon, whether assessed, levied against or payable by
the Lessor or otherwise, with respect to the Facility or any other Property or
Equipment or the acquisition, purchase, sale, rental, use, operation, control or
ownership of the Facility or any other Property or Equipment (including, without
limitation, any claim by any Governmental Authority for transfer tax, transfer
gains tax, mortgage recording tax, filing or other similar taxes or fees in
connection with the acquisition of the Facility or any other Property or
Equipment by the Lessor or otherwise in connection with this Lease) or measured
in any way by the value thereof or by the business of, investment in, or
ownership by the Lessor with respect thereto; provided that this indemnity shall
not apply to (x) Federal, state or local net income or franchise taxes imposed
directly upon any of the limited or general partners of LIC Funding, Limited
Partnership, except that such indemnity shall apply to (1) such net income taxes
imposed by a state or local government or other taxing authority thereof (A) as
a result of the location or use of the Facility or any other Property or
Equipment within the jurisdiction of such government or taxing authority or (B)
to the extent imposed in whole or in part by reason of a relationship or
asserted relationship between such government or other taxing authority and the
Facility or any other Property or Equipment or the transactions contemplated
herein or (2) such net income taxes to the extent imposed as a result of the
inability to claim, or disallowance or other loss of deductions customarily
allowed in computing net income (e.g., interest expense, financing,
administrative, ordinary operating expenses and other fees and expenses) or (y)
the New York Unincorporated Business Tax.
(c) The Lessee shall forthwith upon demand, reimburse any Indemnified
Person for any sum or sums expended with respect to any of the foregoing or,
upon request from any Indemnified Person, shall pay such amounts directly. Any
payment made to or on behalf of any Indemnified Person pursuant to this Section
11 shall be increased to such amount as will, after taking into account all
taxes imposed with respect to the accrual or receipt of such payment (as the
same may be increased pursuant to this sentence), equal the amount of the
payment, reduced by the amount of any savings in such taxes actually realized by
the Indemnified Person as a result of the payment or accrual of the amounts in
respect of which the payment to or on behalf of the Indemnified Person hereunder
is made. To the extent that the Lessee in fact indemnifies any Indemnified
Person under the indemnity provisions of this Lease, the Lessee shall be
subrogated to such Indemnified Person's rights in the affected transaction and
shall have a right to determine the settlement of claims therein.
(d) The indemnities contained in this Section 11 shall not be affected
by, and shall survive, any termination or expiration of this Lease.
(e) Notwithstanding any provisions of this Section 11 to the contrary,
the Lessee shall not indemnify and hold harmless any Indemnified Person against
any claims and liabilities to the extent arising from the gross negligence or
willful misconduct of such Indemnified Person.
(f) In the event the Lessor or any Indemnified Person shall be a party
defendant to any investigation or litigation arising out of any provision
contained in this Lease for which the Lessee has given indemnification, the
Lessor or such other Indemnified Person shall give prompt notice thereof to the
Lessee by telephone and in writing and shall consult and cooperate, at the
Lessee's expense with the Lessee, and if the Lessor or such other Indemnified
Person shall not have appeared or pleaded to any such action then the Lessor or
such other Indemnified Person, as the case may be, does hereby empower any
attorney of any court of record appointed by the Lessee (who shall give prompt
written notice to the Lessor or such other Indemnified Person of such
appointment), with the prior written consent of the Lessor or such other
Indemnified Person, which consent shall not be unreasonably withheld, to appear
for the Lessor or such other Indemnified Person and in good faith and with due
diligence defend such action, to enter counterclaims, to institute actions
against third parties and to do all things necessary or desirable in the
judgment of such attorney after consultation with the Lessor or such other
Indemnified Person and the Lessee to preserve the rights of the Lessor or such
other Indemnified Person and the Lessee, all at the Lessee's own cost and
expense. In the event that an Indemnified Person shall have reasonably concluded
that there are defenses available to the Indemnified Person which conflict with
those available to the Lessee, the Lessee shall not have the right to assume the
defense of any such action on behalf of the Indemnified Person if such
Indemnified Person chooses to defend such action, and all reasonable costs,
expenses and attorneys' fees incurred by the Indemnified Person in defending
such action shall be borne by the Lessee; provided, that in no event shall the
Lessee be liable for the fees and expenses of more than one counsel representing
all Related Assignees with respect to the Facility or any other Property or
Equipment, as applicable, in respect of any action. Notwithstanding the
assumption of its defense by the Lessee pursuant to this paragraph (f), any
Indemnified Person shall have the right to employ separate counsel and to
participate in its defense, but, except as set forth in the immediately
preceding sentence, the fees and expenses of such counsel shall be borne by the
Indemnified Person. In addition, the Lessee will not be liable for any
settlement of any claim, action, proceeding or suit unless the Lessee has
consented thereto in writing (such consent not to be unreasonably withheld). Any
decision by an Indemnified Person to employ its own counsel rather than counsel
selected by the Lessee (whether or not at the Lessee's expense) shall in no way
affect any rights of such Indemnified Person otherwise arising under this Lease.
No failure or delay of the Lessor or such other Indemnified Person to give the
notice required by this Section 11 shall excuse the obligation of the Lessee to
indemnify the Lessor or such other Indemnified Person with respect to such
litigation except to the extent that any increase in liability is a direct
result of such failure or delay.
*SECTION 12(b)(i), (ii) AND (iii) AND SECTION 12(c)(i), (ii) AND (iii), HAVE
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THESE SECTIONS APPEAR ON PAGES
60 AND 61 OF THE COMPLETE DOCUMENT.
SECTION 12. LESSEE'S RIGHT TO TERMINATE.
(a) So long as the Lessee can satisfy the Termination Covenants and the
provisions of this Section 12, and subject to the last sentence of paragraph (a)
of Section 13 hereof, the Lessee shall have the right, upon eighteen (18)
months' notice (the "Termination Notice") to the Lessor and the Related
Assignee, to terminate the lease of the Facility in its entirety or any other
Parcel of Property or Unit of Equipment on the Basic Rent Payment Date at the
end of the Initial Term or the Extended Term, by arranging, at its own cost and
expense, for the sale of the Facility or any other Property or Equipment in an
arm's length transaction on the date of termination and, subject to the
provisions of paragraph (b) of this Section 12, the receipt by the Lessor of
cash in an amount equal to the sale price thereof (the "Cash Proceeds"). In the
event the Lessee delivers the eighteen month notice described in the immediately
preceding sentence, the Lessee shall be required, on the date it delivers such
notice, to pay to the Lessor all amounts owing by the Lessor under the
Derivative Option to enable the Lessor to exercise the option described therein.
In the event the Lessee is unable to satisfy the Termination Covenants, the
Lessee shall not terminate this Lease pursuant to this paragraph (a) as to the
Facility in its entirety or any other Property or Equipment unless the Lessee
has obtained the prior written consent of the Lessor to such termination of this
Lease and the sale of the Facility or such other Property or Equipment and the
Related Assignee has been given notice of such termination and consent. In
addition, if an Event of Default or Event of Lease Termination has occurred and
is continuing, and, prior to the termination of this Lease, in whole or in part,
pursuant to this paragraph (a), the Lessor arranges for the sale of the Facility
or such other Property or Equipment to a third party purchaser, the Termination
Notice shall be invalidated and the Lessee shall no longer have the right to
cause the termination of the lease of the Facility or such Property or Equipment
and sale of the Facility or such Property or Equipment to its designee in
accordance with the terms of this paragraph (a). At the time the Facility or
other Property or Equipment is sold pursuant to this paragraph (a), the Lessor
shall deliver the documents described in paragraph (g) of Section 30 hereof, and
the Lessor's rights and obligations in respect of the Site Lease and the
Easements, or the Ground Lease, as applicable to the leased assets being sold,
as the case may be, shall be assumed by the purchaser, with the Lessor released
from liability in respect thereof. In addition, as a condition to the sale of
the Facility or any Turbine Unit, (i) the Lessee shall assign to the purchaser,
at no cost and to the extent permitted by applicable law, all right, title and
interest of the Lessee in, to and under all Governmental Actions and
Intellectual Property Rights needed for the equipping, maintenance, operation or
use of the Facility or such Turbine Unit (or any part thereof) and obtained and
held by the Lessee at that time, (ii) the Lessee shall assign to the purchaser,
at no cost, and the purchaser shall assume, all right, title and interest of the
Lessee in, to and under the Material Contracts related to such Facility or
Turbine Unit, and in the event any additional consent of any party to any such
Material Contract is required as a precondition thereunder to an assignment to
any such non-foreclosure purchaser designated by the Lessee, to use its best
efforts to obtain any such required consent to such proposed non-foreclosure
assignment and assumption of the Material Contracts, (iii) the Lessee shall
assign to the purchaser, at no cost, all right, title and interest of the Lessee
in, to and under all service agreements in existence at that time in connection
with the equipping, maintenance, service, fueling, operation or use of the
Facility or such Turbine Unit and, in the event any additional consent of any
party other than an Affiliate of the Lessee is required for such assignment, the
Lessee shall use its best efforts to obtain such required consent, (iv) as a
condition to the sale of the Facility in its entirety, the purchaser shall be
entitled to succeed to the Lessor's rights and obligations under the Facility
Support Agreement and (v) as a condition to the sale of any Turbine Unit, the
purchaser shall be entitled to receive an agreement with the Lessee,
substantially similar to the terms of the Facility Support Agreement, relating
to such Turbine Unit and the facilities and services related thereto. In the
event the Lessee fails to obtain any consents required in clause (ii) or (iii)
of the immediately preceding sentence, at the request of such purchaser, the
Lessee shall agree to (1) at the expense of such purchaser, continue to perform
under and maintain in full force and effect the Material Contracts and service
agreements and pay all sums received under the Material Contracts and service
agreements to such purchaser, (2) at the expense of such purchaser, and subject
to the receipt of indemnification reasonably acceptable to the Lessee, take all
actions requested by such purchaser with respect to such Material Contracts and
service agreements (including all actions with respect to the enforcement of the
Lessee's rights and remedies under such Material Contracts and service
agreements), and (3) not amend, modify, supplement, waive a provision of, grant
any consent under or terminate any such Material Contract or service agreement
without the prior written consent of such purchaser.
(b) *
(c) *
(d) All payments and credits referred to in paragraphs (b) and (c) above
shall be made on the termination date of the lease of the Facility or such other
Property or Equipment, as the case may be, pursuant to this Section 12, and the
parties shall account to each other for such payments and credits, and the
Lessee shall pay to the Lessor (without duplication) (i) all Basic Rent accrued
in respect of the Facility or such other Property or Equipment sold, (ii) if
such termination occurs pursuant to paragraph (b) of this Section 12, the Debt
Yield-Maintenance Premium payable in respect of the Facility or such other
Property or Equipment sold, (iii) any Additional Rent owing in respect of the
Facility or such other Property or Equipment sold, (iv) all amounts payable
pursuant to Sections 11, 25 and 27 hereof, (v) all losses, damages, costs and
expenses (including, without limitation, reasonable attorneys' fees and
expenses, commissions, filing fees and sales or transfer taxes) sustained by the
Lessor by reason of such sale, and (vi) all other amounts owing hereunder (after
taking into account the application under the Financing Arrangements of such
purchase price and other payments hereunder), each as of the termination date.
Upon indefeasible receipt by the Lessor of the Cash Proceeds and all other
amounts then due and owing hereunder, including, without limitation, the amount
of excess wear and tear determined pursuant to paragraph (b)(iii) or (c)(iii) of
this Section 12, as the case may be, the Lessor shall transfer title to the
Facility or such other Property or Equipment to the purchaser at the sale
designated by the Lessee. The "Cash Proceeds" referred to in paragraphs (b) and
(c) of this Section 12 shall mean the cash proceeds of sale without reduction
for any amounts paid by the Lessee. In the event of a sale pursuant to this
Section 12, neither the Lessee nor any Affiliate of the Lessee shall purchase
the Facility or such other Property or Equipment sold.
(e) In its notice given pursuant to paragraph (a) of this Section 12,
the Lessee shall advise the Lessor if the sale provided for in such notice will
result in the applicability of paragraph (b)(iii) or (c)(iii) of this Section
12. If the Lessee advises the Lessor that either such paragraph will be
applicable, the Lessor shall have the right to arrange for a sale of the
Facility or such other Property or Equipment to be made to a purchaser
designated by the Lessor, pursuant to paragraph (b) or (c) of this Section 12,
as the case may be, if such purchaser will pay an amount greater than the amount
offered by the Lessee's purchaser. Unless the Lessor shall arrange for such sale
and shall give the Lessee notice thereof within sixty (60) days of the Lessor's
receipt of the Lessee's notice, the Lessee may proceed with the sale to a
purchaser designated by it. Within thirty (30) days of the Lessee's receipt of
the Lessor's notice provided for in the preceding sentence, the Lessee may
arrange for such sale to be made to another purchaser designated by it pursuant
to paragraph (b) or (c) of this Section 12, if such purchaser shall pay an
amount sufficient to render paragraph (b)(iii) or (c)(iii) of this Section 12
inapplicable.
SECTION 13. LESSEE'S RIGHTS OF PURCHASE AND RENEWAL.
(a) The Lessee shall have the right, upon ninety (90) days' written
notice to the Lessor and the Related Assignee, to purchase the Lessor's interest
in the Facility (or any Turbine Unit) or any other Parcel of Property or Unit of
Equipment on (i) on the last Business Day of the Initial Term or (ii) on any
Basic Rent Payment Date during the Extended Term or any Renewal Term for an
amount equal to its Acquisition Cost; provided, however, that, if an Event of
Default or Event of Lease Termination has occurred and is continuing, the Lessor
may arrange for a sale of the entire Facility to a third party purchaser,
provided, that the Lessee shall have the right to effect a purchase of the
entire Facility pursuant to this paragraph (a) not less than sixty (60) days
prior to the Lessor's sale to a third party; provided, further, that the
purchase option contained in this paragraph (a) shall only be available to the
Lessee if the purchase price will not in the circumstances in which such payment
is made constitute a preferential payment or avoidable transfer or otherwise be
subject to recapture pursuant to the provisions of the Federal Bankruptcy Code
in a bankruptcy proceeding by or against the Lessee and will not otherwise
result in the payment being subject to recapture from the Lessor as a result of
an act or omission of the Lessee or as a result of the Lessee's status. In
connection with, and as a condition to, any purchase under this paragraph (a) on
the date upon which such purchase occurs, the Lessee shall pay to the Lessor
(without duplication) (i) the Acquisition Cost of the Facility or such Unit or
other Property or Equipment, (ii) all Basic Rent accrued through the date of
purchase in respect of the Facility or such Unit or other Property or Equipment
sold, (iii) the Debt Yield-Maintenance Premium payable in respect of the
Facility or such Unit or other Property or Equipment sold, (iv) any Additional
Rent owing in respect of the Facility or such Unit or other Property or
Equipment sold, (v) all amounts payable pursuant to Sections 11, 25 and 27
hereof, (vi) all losses, damages, costs and expenses (including, without
limitation, attorneys' fees and expenses, commissions, filing fees and sales or
transfer taxes) sustained by the Lessor by reason of such purchase, and (vii)
all other amounts owing hereunder (after taking into account the application
under any Financing Arrangement of such purchase price and other payments
hereunder). At the time the Facility or such Unit or other Property or Equipment
is sold pursuant to this paragraph (a), the Lessor shall deliver the documents
described in paragraph (g) of Section 30 hereof, and (x) if the entire Facility
is sold, the Lessor's rights and obligations in respect of the Site Lease and
the Easements shall be assumed by the Lessee, and (y) if any other Property or
Equipment is sold, the Lessor's rights and obligations in respect of any
applicable Ground Lease shall be assumed by the Lessee, in each case with the
Lessor released from liability in respect thereof. If any of Unit l, Unit 2 or
Unit 3 and any Equipment exclusively related thereto (a "Segregated Unit") is
sold, the Segregated Unit shall cease to be subject to the terms and provisions
of this Lease (other than paragraph (b) below) and the terms "Facility" and
"Facility Assets" shall thereafter be deemed to exclude the Segregated Unit, but
the Site Lease and Easements (including the Lessee's leasehold interests therein
established under this Lease) shall continue in full force and effect with
respect to the entire Facility Site and all Easements. In addition, upon the
Lessee's purchase of any Segregated Unit, the Lessee shall not be permitted to
cause a sale of the remaining portion of the Facility to a third party pursuant
to Section 12 hereof until such time as the Facility is in compliance with the
standards described in clauses (x) and (y) of paragraph (b)(ii) below.
(b) If the Lessee purchases any Segregated Unit pursuant to Section 13
(a) (other than as part of the purchase of the entire Facility), the purchase
price for such Segregated Unit (the "Unit Purchase Price") shall equal the total
Acquisition Cost for the Facility at the time of such purchase, multiplied by a
fraction the numerator of which is the Capacity (expressed in megawatts) of the
Segregated Unit and the denominator of which is the Capacity (expressed in
megawatts) of the entire Facility at the time of such purchase. Upon the
purchase of such Segregated Unit, the applicable Unit Leasing Record shall be
revised to reflect a reduction in the Acquisition Cost for the Facility equal to
the Unit Purchase Price for such Segregated Unit. The Lessee's right to acquire
any Segregated Unit pursuant to Section 13 (a) is subject to receipt by the
Lessor and each Related Assignee, at least ten (10) Business Days prior to the
requested date of acquisition, of:
(i) a current appraisal addressed to the Lessor and each Related
Assignee from the Appraiser (or another independent appraiser acceptable to the
Lessor and each Related Assignee in their sole discretion) with respect to (x)
the value of the Facility after giving effect to the purchase of the Segregated
Unit and (y) the value of the Facility without giving effect to such purchase,
both at the date of such purchase and at the end of the Lease Term; and the
appraised values of the Facility (excluding the Segregated Unit) at both such
dates shall at least equal the appraised value of the Facility (including the
Segregated Unit) multiplied by a fraction (the "Adjustment Factor") the
numerator of which is the Capacity (expressed in megawatts) of the Facility
(excluding the Segregated Unit) and the denominator of which is the Capacity
(expressed in megawatts) of the Facility (including the Segregated Unit);
(ii) a report of an independent engineering firm with national
reputation and experience in the electric generating industry that addresses the
impact of excluding the Segregated Unit from the combined operations of the
remaining portion of Facility and concludes that, upon completion of such work
as may be required to implement the exclusion of the Segregated Unit from the
Facility (or within a reasonable period of time thereafter, consistent with
Prudent Utility Practice), (x) the operational integrity, safety and reliability
of the remaining portion of Facility will not be impaired in any material
respect below the condition thereof immediately prior to such exclusion and (y)
the remaining portion of the Facility will have the functional ability to
perform in commercial operation substantially at a capacity (expressed in
megawatts) at least equal to the Capacity of the Facility immediately prior to
such exclusion, multiplied by the Adjustment Factor;
(iii) a certificate from a Responsible Officer of the Lessee
certifying that (x) any work that may be required to implement the exclusion of
the Segregated Unit from the Facility will be completed (at the Lessee's sole
cost and expense), and the remaining portion of the Facility will be capable of
operating, in accordance with Prudent Utility Practice and in compliance with
all applicable Legal Requirements in all material respects and all Insurance
Requirements and (y) after giving effect to the purchase of the Segregated Unit,
the Lessee will be able to fully perform its obligations under this Lease and
the other Operative Documents; and
(iv) such other documentation as the Lessor or any Related
Assignee may reasonably request.
(c) Subject to arranging for refinancing of the Lessor's debt
obligations upon terms reasonably acceptable to the Lessor, and so long as (i)
no Event of Default, Event of Loss or Event of Lease Termination has occurred
and is continuing and (ii) all amounts owing under any Financing Arrangement
have been paid in full (after taking into account the application under any
Financing Arrangement of all payments hereunder), the Lessee shall have the
right, upon ninety (90) days' written notice to the Lessor, to renew the lease
of the Facility or such other Property or Equipment for an additional term (the
"Renewal Term") to be determined by the Lessee, commencing on the first day of
the calendar month following the last day of the Extended Term, on the same
terms and conditions (including, without limitation, being subject to all rights
and remedies of the Lessor and any Related Assignee relating to Events of
Default, Events of Loss and Events of Lease Termination) as existed during the
Lease Term, at the fair market value rental.
(d) The fair market value rental of the Facility or any other Parcel of
Property or Unit of Equipment for purposes of paragraph (c) of this Section 13
shall be an amount equal to 0.125% per month of the Acquisition Cost of the
Facility or such other Parcel or Unit, as the case may be.
(e) In the event the lease of the Facility or any other Property or
Equipment is not renewed at the end of the Extended Term with respect to the
Facility or such other Property or Equipment in accordance with the provisions
of paragraph (c) of this Section 13, the Lessee shall be required to select one
of the following two options: (i) to purchase, on the last day of the Extended
Term, the Lessor's interest in the Facility or such other Property or Equipment,
as the case may be, for cash at its Acquisition Cost, in accordance with the
provisions of paragraph (a) of this Section 13 or (ii) to arrange for the
Facility or such other Property or Equipment to be sold in accordance with the
provisions of Section 12 hereof and with the consequences therein provided
(including, without limitation, indefeasible receipt by the Lessor of the Cash
Proceeds and all other amounts due and owing to the Lessor thereunder), except
that such sale must occur on the last day of such Extended Term; provided,
however, that if the Facility or such other Property or Equipment is not sold
pursuant to Section 12 hereof prior to the last day of the Extended Term of the
Facility or such other Property or Equipment, as the case may be, the Lessee
shall be deemed to have selected the option described in clause (i) of this
sentence.
SECTION 14. TERMINATION UPON CERTAIN EVENTS.
This Lease shall terminate and the Lessee shall be required to purchase
the Facility and all other Parcels of Property and Units of Equipment from the
Lessor upon the happening of the following events during the term of this Lease
with respect to the Facility or such other Parcels of Property and Units of
Equipment (each an "Event of Lease Termination"): (A) solely as a result of this
Lease, a Financing Arrangement, the Material Contracts and the transactions
contemplated hereby or thereby, the Lessor becomes (or with the passage of time
would become), or is declared by the SEC to be, subject to financial, rate,
utility or other similar regulation as a public utility, an electric utility or
a public utility holding company under the 1935 Act, or the Lessor, Merrill
Lynch, Merrill Leasing, any Related Assignee, any Affiliate of the foregoing or
their respective officers, directors, shareholders, members, trustees, partners
(general and limited, including, without limitation, the general and limited
partners of the Lessor) or employees shall become subject to such regulation
under the 1935 Act; (B) solely as a result of this Lease, a Financing
Arrangement, the Material Contracts and the transactions contemplated hereby or
thereby, the Lessor becomes (or with the passage of time would become), and is
declared by the Secretary of Energy (or any successor thereto) or the FERC to
be, subject to financial, rate, utility or other similar regulation under the
FPA as a public utility, an electric utility or a public utility holding company
or the Lessor, Merrill Lynch, Merrill Leasing, any Related Assignee, any
Affiliate of the foregoing or their respective officers, directors,
shareholders, members, trustees, partners (general and limited, including,
without limitation, the general and limited partners of the Lessor) or employees
shall become subject to such regulation by the FERC; (C) solely as a result of
this Lease, a Financing Arrangement, the Material Contracts and the transactions
contemplated hereby or thereby, the Lessor becomes (or with the passage of time
would become), and is declared by any relevant governmental body or similar
entity under the laws of any state or locality having jurisdiction over the
Lessor, the Lessee or any such transactions or activities, to be, subject to
financial, rate, utility or other similar regulation as a public utility, an
electric utility or a public utility holding company or the Lessor, Merrill
Lynch, Merrill Leasing, any Related Assignee, any Affiliate of the foregoing or
their respective officers, directors, shareholders, members, trustees, partners
(general and limited, including, without limitation, the general and limited
partners of the Lessor) or employees shall become subject to such regulation
under any such laws; (D) after the date hereof, any law or regulation or
interpretation of any law or regulation shall be adopted or enforced by any
governmental or regulatory authority (including, without limitation, the
Secretary of Energy, the SEC, the FERC, the public service commission of any
state or any similar commission of any locality having jurisdiction over the
Lessor, the Lessee or any such transactions), and as a result of such adoption
or enforcement, approval of this Lease, a Financing Arrangement and the
transactions contemplated hereby or thereby shall be required and shall not have
been obtained within any grace period after such adoption or enforcement or, as
a result of which adoption or enforcement of this Lease, a Financing Arrangement
and any transaction contemplated hereby or thereby, including any payments to be
made by or to the Lessee or the ownership of the Facility or any other Equipment
or Property or interest therein by the Lessor, shall be or become unlawful or
unenforceable or the performance of this Lease, a Financing Arrangement or the
transactions contemplated hereby or thereby shall be rendered impracticable in
any material way; or (E) the occurrence of any event or circumstance relating to
Environmental Matters, Environmental Damages or Environmental Requirements with
respect to the Facility or any Parcel of Property or Unit of Equipment that
could reasonably be expected to have a material adverse effect on (i) the
ability of the Lessee to observe and perform its obligations under this Lease or
the other Operative Documents to which it is a party in a timely manner, (ii)
the ability of the Guarantor to perform its obligations under the Guaranty in a
timely manner, (iii) the business, assets, properties, financial condition or
operations of the Guarantor, (iv) the rights or interests of the Lessor or the
Related Assignee under this Lease or the applicable Financing Arrangements or
(v) the leasing, ownership or value of the Facility . Upon the date of the
occurrence of any Event of Lease Termination (the first such date being herein
called the "Termination Event Date"), this Lease shall terminate, except with
respect to obligations and liabilities of the Lessee, actual or contingent,
which arose under this Lease on or prior to the Termination Event Date and
except for the Lessee's obligations set forth in Sections 7, 8, 9, 10, 15, 16,
17, 18, 19, 25 and 27 hereof, and in this Section 14, all of which obligations
will continue until the delivery of a bill of sale, a deed or similar
documentation by the Lessor and the payment by the Lessee provided for herein,
and except that the Lessee's obligations under Section 11 hereof shall continue
as set forth herein, and forthwith also upon such termination, the entire
interest of the Lessor in the Facility and all other Property and Equipment
shall automatically transfer to and be vested in the Lessee, without the
necessity of any action by either the Lessor or the Lessee, but subject to the
rights of any Related Assignee. Promptly upon learning of any pending or
threatened action, the effect of which could result in an Event of Lease
Termination described under subclause (D), the Lessee shall notify the Lessor
and each Related Assignee of such action. As soon as possible after either the
Lessor or the Lessee shall learn of the happening of any Event of Lease
Termination (for purposes of this provision, if there shall be any grace period
applicable to an Event of Lease Termination described under subclause (D), such
Event of Lease Termination shall be deemed to have happened upon the day next
preceding the date on which such applicable grace period expires), such party
shall give notice thereof to the other party hereto which notice shall (i)
acknowledge that this Lease has terminated, subject to the continuing
obligations of the Lessee mentioned above, and that the Lessor's interest in the
Facility and all other Property and Equipment has transferred to and vested in
the Lessee, subject as aforesaid and (ii) state that on the twentieth day of the
calendar month next succeeding the Termination Event Date (the "Termination
Settlement Date"), the Lessee shall be obligated to pay to the Lessor, as the
purchase price for the Lessor's interest in the Facility and all other Property
and Equipment, the sum of the Acquisition Cost of the Facility and all other
Property and Equipment as of the Termination Settlement Date. In connection with
any purchase under this Section 14, on the Termination Settlement Date, the
Lessee shall pay to the Lessor, in addition to any purchase price payable, all
other amounts owing hereunder, including, without limitation but without
duplication, (i) all Basic Rent accrued through the date of termination of this
Lease and the Debt Yield-Maintenance Premium payable in respect of the Facility
or such other Property or Equipment, (ii) any Additional Rent owing, (iii) all
amounts payable pursuant to Sections 11, 25 and 27 hereof, (iv) all losses,
damages, costs and expenses (including, without limitation, reasonable
attorneys' fees and expenses, commissions, filing fees and sales or transfer
taxes) sustained by the Lessor by reason of such purchase and (v) all other
amounts owing hereunder, each taking into account the application under a
Financing Arrangement of such purchase price and other payments hereunder), each
as of the Termination Settlement Date. Upon the delivery of notice of
termination of this Lease as provided in this Section 14, the Lessee shall
become obligated to make the payment required on the Termination Settlement Date
to the same extent as if it had acknowledged in writing its obligation to do so.
The Lessee's obligation to make such payment shall be unconditional and
unaffected by any event or matter whatsoever and shall survive the termination
of this Lease. At the time the Facility or such other Property and Equipment is
sold pursuant to this Section 14, the Lessor shall deliver the documents
described in paragraph (g) of Section 30 hereof, and the Lessor's rights and
obligations in respect of the Site Lease, the Easements and any Ground Lease
shall be assumed by the Lessee, with the Lessor released from liability in
respect thereof.
SECTION 15. LOSS OF OR DAMAGE TO PROPERTY OR EQUIPMENT.
(a) The Lessee hereby assumes all risk of loss of or damage to the
Facility and any other Property or Equipment, however caused. No loss of or
damage to the Facility or any other Property or Equipment shall impair any
obligation of the Lessee under this Lease, which shall continue in full force
and effect regardless of such loss or damage.
(b) In the event of damage of any kind whatsoever to the Facility or any
other Property or Equipment (unless the same is determined by the Lessee to be
damaged beyond repair), the Lessee shall promptly notify the Lessor and the
Related Assignee in writing of such event and shall, at its own cost and
expense, consistent with Prudent Utility Practice, promptly place the same in
good operating order, repair and condition and restore the Facility to at least
substantially the same value and usefulness that existed prior to such damage.
The Lessee's right to any proceeds paid under any insurance policy or policies
required under Section 10 of this Lease with respect to any such damage to the
Facility or any other Property or Equipment which has been so placed by the
Lessee in good operating order, repair and condition is governed by paragraph
(j) of Section 10 hereof.
(c) If (A) an Event of Loss with respect to the Facility or any other
Property or Equipment has occurred and is continuing, (B) the Facility or such
other Property or Equipment is attached (other than on a claim against the
Lessor as to which the Lessee is not obligated to indemnify the Lessor) and the
attachment is not removed within one hundred eighty (180) days, or (C) a Taking
of the Facility or such other Property or Equipment as described in Section 16
(a) hereof shall occur, then in any such event, (i) the Lessee shall promptly
notify the Lessor and the Related Assignee in writing of such event, (ii) within
one hundred eighty (180) days of such event the Lessee shall pay to the Lessor
an amount equal to the Acquisition Cost of the Facility or such other Property
or Equipment and (iii) the Initial Term, Extended Term or Renewal Term of the
Facility or such Property or Equipment shall continue until the Lessor receives
payment from the Lessee of the amount payable pursuant to this paragraph (c)
including, without limitation, (1) all Basic Rent accrued through the date of
payment, (2) any Additional Rent owing, (3) all amounts payable pursuant to
Sections 11, 25 and 27 hereof, (4) all losses, damages, costs and expenses
(including, without limitation, attorneys' fees and expenses, commissions,
filing fees and sales or transfer taxes) sustained by the Lessor by reason of
such event and (5) all other amounts owing hereunder after taking into account
the application under a Financing Arrangement of such payments hereunder, and
shall thereupon terminate. Upon the indefeasible payment by the Lessee of all
amounts referred to in the immediately preceding sentence, (i) all insurance and
condemnation proceeds (net of all collection costs) shall be paid by the Lessor
to the Lessee, (ii) the Lessee shall be subrogated to the Lessor's rights
resulting from the events described in clauses (A) through (C) above, and (iii)
the Lessor shall convey title to the Facility or such other Property or
Equipment pursuant to the documents described in paragraph (g) of Section 30
hereof, including, without limitation, the Lessor's interest in the Site Lease,
the Easements and any Ground Lease applicable to the Facility or such other
Property or Equipment, to the Lessee, free and clear of any Lien pursuant to any
Financing Arrangement.
SECTION 16. CONDEMNATION AND DEDICATION OF THE FACILITY AND PROPERTY;
EASEMENTS.
(a) If the use, occupancy or title to all or a substantial portion of
the Facility or any other Parcel of Property is taken, requisitioned or sold in,
by or on account of actual or threatened eminent domain proceedings or other
action by any person or authority having the power of eminent domain (such
events collectively referred to as a "Taking"), then the Lessee shall make the
payment provided in, and the Initial Term, Extended Term or Renewal Term shall
terminate as provided in, paragraph (c) of Section 15 hereof. The Lessee's
obligation to make such payment shall survive the expiration or termination of
this Lease. The portion of the proceeds from any award or sale made in
connection with such Taking attributable to the Lessor's interest in the
Facility or any other Property shall be retained by the Lessor and, upon the
indefeasible payment by the Lessee of all amounts referred to in paragraph (c)
of Section 15 hereof, such amount shall be paid to the Lessee. A Taking shall be
deemed to affect a "substantial portion" of the Facility or any other Property
if, in the reasonable judgment of the Lessor and the Related Assignee, after
such Taking, (i) the Lessee is not able to fully perform its obligations under
this Lease or (ii) a material diminution in the value, utility or remaining
economic useful life of the Facility or such other Property will occur.
(b) If less than a substantial portion of the Facility or any other
Parcel of Property is subject to a Taking, then this Lease shall continue in
effect as to the portion of the Facility or Parcel not taken and, so long as (i)
no Potential Default, Event of Default, Event of Loss or Event of Lease
Termination has occurred and is continuing, and (ii) the Lessor and the Related
Assignee shall determine that restoration of the Facility or such other Property
is consistent with Prudent Utility Practice and that sufficient funds are
available to complete such restoration, any net proceeds shall be paid to the
Lessee for the restoration of the Facility or such other Property in accordance
with paragraph (j) of Section 10 hereof; provided that, if either of the
conditions set forth in clause (i) or (ii) above are not satisfied, then the net
proceeds shall be paid to the Lessor and if and to the extent that such proceeds
are not applied to (or paid to the Lessee in reimbursement for) the restoration
of the Facility or such Property, the Acquisition Cost shall be reduced by the
Lessor by the amount of such proceeds. Thereupon, the applicable Unit Leasing
Record shall be revised to reflect such reduction in Acquisition Cost.
(c) So long as no Event of Default hereunder has occurred and is
continuing, the Lessee shall have the right (i) to grant minor easements for the
benefit of the Facility or any other Parcel of Property, (ii) to voluntarily
dedicate or convey, as required, portions of the Facility or any other Parcel of
Property for road, highway and other public purposes and (iii) to voluntarily
execute petitions to have the Facility or any other Parcel of Property or a
portion thereof annexed to any municipality or included within any utility,
highway or other improvement or service district, provided that no more than
minor restoration is required. If any monetary consideration is paid for such
easement or dedication, the Lessee shall be entitled to receive or retain such
consideration.
The Lessee shall exercise the above power to grant without the joinder
of the Lessor, except that the Lessor will cooperate, without unreasonable delay
and at the Lessee's expense, as necessary, and join in the execution of any
appropriate instrument or shall execute any separate instrument as necessary. As
a condition precedent to the Lessee's exercise of any of the Lessee's powers
under this Section 16, (i) the Lessee shall give the Lessor five (5) Business
Days' prior written notice of the proposed action and (ii) the Lessee shall
provide to the Lessor a certificate of the Lessee stating that such action will
not adversely affect either the fair market value of the Facility or such other
Property or the use of the Facility or such other Property for its intended
purpose, will not affect the Lessor's ability to exercise its rights and
remedies under this Lease and that the Lessee undertakes to remain obligated
under this Lease to the same extent as if the Lessee had not exercised its
powers under this Section 16 and the Lessee will perform all obligations under
such instrument and shall prepare all required documents and provide all other
instruments and certificates as the Lessor may reasonably request.
SECTION 17. SURRENDER OF PROPERTY OR EQUIPMENT.
(a) Subject to the provisions of Sections 12, 13, 14, 15, 16, 19 and 29
hereof, upon termination of the lease of the Facility or any other Property or
Equipment hereunder, the Lessee shall surrender the Facility or such other
Property or Equipment to the Lessor. Equipment shall be surrendered by
delivering the same to the Lessor at such location as the Lessor and the Lessee
may agree and, if they are unable to agree, at such location as the Lessor may
reasonably direct. Such Property or Equipment shall be surrendered in the
condition required by paragraph (b) of Section 9 of this Lease. Any cost of
removal and delivery of Equipment to the Lessor, shall be paid by the Lessee.
(b) The Lessee shall be obligated to obtain all Governmental Actions
necessary for such surrender. In connection with the Lessee's surrender of
possession of the Facility or any other Property or Equipment to the Lessor, the
Lessee shall furnish to the Lessor (i) copies certified by a Responsible Officer
of the Lessee of all Governmental Action necessary to effect such surrender and
receipt of possession and permitting the Lessor (without the Lessor being
required to change its business structure or otherwise to suffer any rule or
potential adverse effect on its business or that of its Affiliates as a result
of such surrender and receipt of possession) to possess the Facility or such
Property or Equipment with or without the continued involvement of the Lessee,
which Governmental Action shall be in full force and effect, (ii) an opinion of
counsel reasonably satisfactory to the Lessor, to the effect that (1) the Lessee
has obtained all Governmental Action necessary to effect such surrender by the
Lessee and receipt of possession by the Lessor of the Facility or such Property
or Equipment without the Lessor being required to change its business or
otherwise to suffer any real or potential adverse effect on its business or that
of its Affiliates as a result of such surrender and receipt of possession and
without regard to the continued involvement of the Lessee and (2) such
Governmental Action is in full force and effect and not subject to any judicial
or administrative contest, challenge or review and (iii) all logs, manuals,
inspection data, books and records or copies thereof and other information,
which are necessary to operate the Facility or such Property or Equipment and
which are in accordance with Prudent Utility Practice customarily retained (or
that the Lessee actually did retain) or are required by law to be retained with
respect to similar property and equipment, including, without limitation, all
software and manuals applicable to the Facility or such Property or Equipment
and all design plans, know-how, records and information used by the Lessee
during the prior 12 months of operation of the Facility or such Property or
Equipment.
SECTION 18. EVENTS OF DEFAULT.
Any of the following events of default shall constitute an "Event of
Default" and shall give rise to the rights on the part of the Lessor described
in Section 19 hereof:
(a) Failure of the Lessee to pay amounts due to the Lessor at the time
of any scheduled sale of the Facility or any other Parcel of Property, Unit of
Equipment or Turbine Unit hereunder, failure of the Lessee to pay Basic Rent for
more than five (5) days after such payment is due pursuant to Section 7 hereof,
or failure of the Lessee to pay any other amount payable by the Lessee hereunder
for more than ten (10) days after such payment is due; or
(b) Failure to comply with the Insurance Requirements, or default in the
performance of the covenants contained in paragraphs (a), (b), (c), (e) or (i)
of Section 2(ii) hereof, paragraph (i) of Section 8 hereof, or paragraph (n) of
Section 10 hereof; or
(c) Default in the performance of any other obligation or covenant of
the Lessee pursuant to this Lease or any other Operative Document to which the
Lessee is a party and the continuance of such default for thirty (30) days after
the Lessee obtains actual knowledge thereof; provided, that if such default is
of a nature that is not capable of being cured within such thirty (30) day
period and the Lessee shall have diligently commenced curing such default and
proceeds diligently and in good faith thereafter to complete curing such
default, such thirty (30) day period shall be extended to ninety (90) days;
provided, further, that if such default is a default in the performance of any
obligation or covenant of the Lessee relating to Environmental Matters (other
than any obligation or covenant of the Lessee under paragraph (g)(vii) of
Section 2(ii)), such thirty (30) day period shall be extended for so long as (x)
such default is susceptible to being cured, (y) the Lessee shall have diligently
commenced curing such default and proceeds diligently and in good faith
thereafter to complete curing such default in accordance with all applicable
requirements of any Governmental Authority with jurisdiction over the matter and
the Lessee and (z) such default could not reasonably be expected to have a
material adverse effect on (1) the ability of the Lessee to observe and perform
its obligations under this Lease or the other Operative Documents to which it is
a party in a timely manner, (2) the ability of the Guarantor to perform its
obligations under the Guaranty in a timely manner, (3) the business, assets,
properties, financial condition or operations of the Guarantor, (4) the rights
or interests of the Lessor or the Related Assignee under this Lease or the
applicable Financing Arrangements or (5) the leasing, ownership or value of the
Facility; or
(d) The entry of a decree or order for relief in respect of the Lessee
or the Guarantor by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or any other applicable Federal or state bankruptcy, insolvency or
other similar law, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of the Lessee or the Guarantor or of
any substantial part of the Lessee's or the Guarantor's property, or ordering
the winding up or liquidation of the Lessee's or the Guarantor's affairs, and
the continuance of any such decree or order unstayed and in effect for a period
of sixty (60) consecutive days; or
(e) The suspension or discontinuance of the Lessee's or the Guarantor's
business operations, the Lessee's or the Guarantor's insolvency (however
evidenced) or the Lessee's or the Guarantor's admission of insolvency or
bankruptcy, or the commencement by the Lessee or the Guarantor of a voluntary
case under the Federal bankruptcy laws, as now or hereafter constituted, or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or the consent by the Lessee or the Guarantor to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of the Lessee or the Guarantor or of any substantial
part of the Lessee's or the Guarantor's property, or the making by the Lessee or
the Guarantor of an assignment for the benefit of creditors, or the failure of
the Lessee or the Guarantor generally to pay their debts as such debts become
due, or the taking of corporate action by the Lessee or the Guarantor in
furtherance of any such action; or
(f) A default or event of default, the effect of which is to permit the
holder or holders of any Indebtedness of the Lessee, the Guarantor or a Material
Subsidiary in excess of $5,000,000 in the aggregate, or a trustee or agent on
behalf of such holder or holders, to cause such Indebtedness to become due prior
to its stated maturity, shall occur and be continuing under the provisions of
any agreement pursuant to which such Indebtedness was created or instrument
evidencing such Indebtedness or any obligation of the Lessee, the Guarantor or
such Material Subsidiary for the payment of such Indebtedness shall become or be
declared to be due and payable prior to its stated maturity, or shall not be
paid when due (after giving effect to any applicable grace period); or
(g) Any representation or warranty made by the Lessee in this Lease or
in any other Operative Document to which the Lessee is a party shall prove to
have been false or inaccurate in any material respect on or as of the date made
or deemed made, unless, solely in the case of the representations and warranties
contained in paragraphs (d), (f), (h), (r) and (t) of Section 2(i) hereof) each
of the following shall exist:
(i) such representation or warranty is of a nature that it is
capable of being cured within thirty (30) days after the Lessee became aware of
the falsity or inaccuracy of such representation or warranty;
(ii) the Lessee shall have diligently commenced curing such
default and is proceeding diligently and in good faith to cure such false or
inaccurate representation or warranty and shall have cured such default within
such thirty (30) day period;
(iii) no Responsible Officer shall have been aware that such
representation or warranty was false or inaccurate when such representation or
warranty was made or deemed made; and
(iv) such false or inaccurate representation or warranty has not
resulted in a material adverse effect on (i) the use, operation, leasing,
ownership or value of the Facility or any Property or Equipment, (ii) the
ability of the Lessee to observe and perform its obligations under this Lease or
any other Operative Document to which the Lessee is a party in a timely manner,
(iii) the business, properties or financial condition of the Lessee, or (iv) the
rights or interests of the Lessor or any Related Assignee under this Lease and
has not created a reasonable likelihood of the Lessor or any Related Assignee
incurring Environmental Damages; or
(h) Any final non-appealable judgment for the payment of money in excess
of $5,000,000 shall be rendered against the Lessee, the Guarantor or a Material
Subsidiary by any court of competent jurisdiction and the same shall remain
undischarged for a period of thirty (30) days during which execution of such
judgment or judgments shall not be effectively stayed; or
(i) The Guaranty ceases to be in full force and effect or the Guarantor
asserts the same in writing or an Event of Default (as defined in the Guaranty)
shall occur and be continuing; or
(j) [intentionally omitted]
(k) Subject to Section 8(i) hereof, the Financing Arrangements cease to
create a valid and perfected first priority Lien, subject to Permitted Liens, in
any portion of the Facility or any other Property or Equipment, this Lease or
the rights or interests thereunder (to the extent such documents purport to
create such a Lien).
SECTION 19. RIGHTS UPON DEFAULT.
Upon the occurrence and continuation of any Event of Default the Lessor
may do any one or more of the following:
(a) Terminate the lease of the Facility or any or all Property or Equipment
leased hereunder;
(b) Whether or not the lease of the Facility or any other Property or
Equipment is terminated, take immediate possession of and remove any or all
equipment or property of the Lessor in the possession of the Lessee, wherever
situated, and for such purpose, enter upon any premises without liability to the
Lessee for so doing;
(c) Whether or not any action has been taken under paragraph (a) or (b)
above, sell the Facility or any other Property or Equipment (with or without the
concurrence or request of the Lessee);
(d) Hold, use, occupy, operate, maintain, repair, remove, lease or keep
idle the Facility or any or all other Property or Equipment as the Lessor in its
sole discretion may determine, without any duty to account to the Lessee with
respect to any such action or inaction or for any proceeds thereof or to
mitigate damages; and
(e) Exercise any other right or remedy which may be available under
applicable law and in general proceed by appropriate judicial proceedings,
either at law or in equity, to enforce the terms hereof or to recover damages
for the breach hereof.
Suit or suits for the recovery of any default in the payment of any sum
due hereunder or for damages may be brought by the Lessor from time to time at
the Lessor's election, and nothing herein contained shall be deemed to require
the Lessor to await the date whereon this Lease or the term hereof would have
expired by limitation had there been no such default by the Lessee or no such
termination or cancellation.
The receipt of any payments under this Lease by the Lessor with
knowledge of any breach of this Lease by the Lessee or of any default by the
Lessee in the performance of any of the terms, covenants or conditions of this
Lease, shall not be deemed to be a waiver of any provision of this Lease.
No receipt of moneys by the Lessor from the Lessee after the termination
or cancellation hereof in any lawful manner shall reinstate, continue or extend
the Lease Term or any Renewal Term, or affect any notice theretofore given to
the Lessee, or operate as a waiver of the right of the Lessor to enforce the
payment of Basic Rent or Additional Rent or other charges payable hereunder, or
operate as a waiver of the right of the Lessor to recover possession of the
Facility or any other Unit of Equipment or Parcel of Property by proper suit,
action, proceedings or remedy; it being agreed that, after the service of notice
to terminate or cancel this Lease, and the expiration of the time therein
specified, if the default has not been cured in the meantime, or after the
commencement of suit, action or summary proceedings or of any other remedy, or
after a final order, warrant or judgment for the possession of the Facility or
any other Unit of Equipment or Parcel of Property, the Lessor may demand,
receive and collect any moneys payable hereunder, without in any manner
affecting such notice, proceedings, suit, action, order, warrant or judgment;
and any and all such moneys so collected shall be deemed to be payments on
account of the Lessee's liability hereunder. Acceptance of the keys to the
Facility or any other Parcel of Property, or any similar act, by the Lessor, or
any Lessee or employee, during the term hereof, shall not be deemed to be an
acceptance of a surrender of the Facility or any other Parcel of Property unless
the Lessor shall consent thereto in writing.
After any Event of Default, the Lessee shall be liable for, and the
Lessor may recover from the Lessee, without duplication, (i) all Basic Rent
accrued through the date of receipt of all liquidated damages payable upon
termination of this Lease and the Debt Yield-Maintenance Premium payable, (ii)
any Additional Rent owing, (iii) all amounts payable pursuant to Sections 11, 25
and 27 hereof, (iv) all losses, damages, costs and expenses (including, without
limitation, attorneys' fees and expenses, commissions, filing fees and sales or
transfer taxes and all costs and expenses related to (x) the conduct of
investigations, studies, sampling and/or testing of the Facility and any other
Property and (y) the taking of any action, including, without limitation, any
remedial measures or removal with respect to the Facility and any other
Property, each as required by the Related Assignee pursuant to the terms of a
Financing Arrangement) sustained by the Lessor or by the Related Assignee by
reason of such Event of Default and the exercise of the Lessor's remedies with
respect thereto, including without limitation, in the event of a sale by the
Lessor of the Facility or any other Property or Equipment pursuant to this
Section 19, all costs and expenses associated with such sale and (v) all other
amounts owing hereunder (after taking into account the application under a
Financing Arrangement of any payments made under this Section 19) excluding, in
all cases, costs or expenses included in Acquisition Cost. The amounts payable
in clauses (i) through (v) above are hereinafter sometimes referred to as the
"Accrued Default Obligations".
After termination of this Lease as a result of an Event of Default
pursuant to Section 19(a) hereof, the Lessor may sell its interest in the
Facility and any other Property and Equipment upon any terms that the Lessor
deems satisfactory, free of any rights of the Lessee or any Person claiming
through or under the Lessee (including, without limitation, any rights
hereunder). In the event of any such sale, in addition to the Accrued Default
Obligations, the Lessor shall be entitled to recover from the Lessee, as
liquidated damages and not as a penalty, an amount equal to the Acquisition Cost
of the Facility and all other Property and Equipment under this Lease. In the
case of the sale of the Facility, proceeds of such sale received by the Lessor
shall be credited against the Accrued Default Obligations and the Acquisition
Cost of the Facility the Lessee is required to pay under this Section 19. In the
case of other Property and Equipment, proceeds of sale of such Property and
Equipment received by the Lessor shall be credited against the Accrued Default
Obligations and the Acquisition Cost of such other Property and Equipment the
Lessee is required to pay under this Section 19. If such proceeds, together with
any amounts paid by the Lessee under the preceding paragraph, exceed the sum of
(i) the Accrued Default Obligations and (ii) the Acquisition Cost of the
Facility and all Property and Equipment, such excess shall be paid by the Lessor
to the Lessee. As an alternative to any such sale, in addition to the Accrued
Default Obligations, the Lessor may require the Lessee to pay to the Lessor, and
the Lessee shall pay to the Lessor, as liquidated damages and not as a penalty,
an amount equal to the Acquisition Cost of the Facility and all other Property
and Equipment under this Lease. If the Lessor subsequently sells its interest in
the Facility or such other Property or Equipment, the proceeds of any such sale
(net of any unreimbursed costs or liabilities incurred by the Lessor or the
Related Assignee with respect to the Facility or such other Property or
Equipment after the termination of the Lease, which are not included in the
Accrued Default Obligations) shall be distributed as provided in the third and
fourth sentences of this paragraph. In addition, if the Lessee converts the
Facility or any other Property or Equipment or any part thereof after an Event
of Default, or if the Facility or any other Property or Equipment is lost or
destroyed at the time of the Event of Default, in addition to the Accrued
Default Obligations, the Lessor may require the Lessee to pay to the Lessor, and
the Lessee shall pay to the Lessor, as liquidated damages and not as a penalty,
an amount equal to the Acquisition Cost of the Facility and all other Property
and Equipment under this Lease. In the event the Lessor receives indefeasible
payment pursuant to this paragraph from the Lessee of the Acquisition Cost of
the Facility and all other Property and Equipment and the Accrued Default
Obligations, the Lessor shall transfer all of the Lessor's right, title and
interest in and to the Facility and such other Property and Equipment to the
Lessee.
Upon the occurrence and continuance of any Event of Default, the Lessee
shall (unless the Lessee has purchased the Facility pursuant to this Section
19), upon the request of the Lessor or the Related Assignee, exercise all
commercially reasonable efforts (i) to provide the Lessor (or a designated
assignee of the Lessor or the Related Assignee) with all easements, licenses,
manuals, manufacturer's warranties and other matters and services necessary to
enable the Facility and any Turbine Unit to operate as an EWG in connection with
the sale of electricity to third parties on commercially reasonable terms no
less favorable to the Lessor than those that existed prior to such Event of
Default, (ii) to provide the Lessor (or a designated assignee of the Lessor or
the Related Assignee) with any Governmental Actions and Intellectual Property
Rights that are necessary to enable the Facility and any Turbine Unit to operate
as an EWG in connection with the sale of electricity to third parties on
commercially reasonable terms no less favorable to the Lessor than those that
existed prior to such Event of Default, (iii) to provide the Lessor (or a
designated assignee of the Lessor or the Related Assignee) with any other
permits or licenses required to enable such party to operate the Facility and
any Turbine Unit as an EWG in connection with the sale of electricity to third
parties on commercially reasonable terms no less favorable to the Lessor than
those that existed immediately prior to such Event of Default and (iv) to
provide the Lessor (or a designated assignee of the Lessor or the Related
Assignee) with any other fuel supply agreements, transmission agreements,
service agreements and contracts or subcontracts relating to the provision of
services, materials, supplies and benefits contemplated by the Facility Support
Agreement in existence at such time to enable such party to operate the Facility
and any Turbine Unit as an EWG in connection with the sale of electricity to
third parties on commercially reasonable terms no less favorable to the Lessor
than those that existed immediately prior to such Event of Default. The Lessee's
obligations contained in this subsection shall survive the expiration or other
termination of this Lease until the Lessor receives payment of (1) all amounts
owing pursuant to this Lease, (2) all losses, damages, costs and expenses
(including, without limitation, attorneys' fees and expenses, commissions,
filing fees and sales or transfer taxes) sustained by the Lessor, (3) all
amounts owing under all Financing Arrangements and (4) any unreimbursed costs
incurred by the Lessor or the Related Assignee with respect to the Facility
after the term of this Lease, net of any revenues received from the operation of
the Facility.
In the event of a sale pursuant to this Section 19, upon indefeasible
receipt by the Lessor of the amounts payable hereunder, the Lessor shall
transfer all of the Lessor's right, title and interest in and to the Facility
and all other Property and Equipment to the Lessee or a purchaser other than the
Lessee, as the case may be.
No remedy referred to in this Section 19 is intended to be exclusive,
but each shall be cumulative and in addition to any other remedy referred to
above or otherwise available to the Lessor at law or in equity, and the exercise
in whole or in part by the Lessor of any one or more of such remedies shall not
preclude the simultaneous or later exercise by the Lessor of any or all such
other remedies.
No waiver by the Lessor of any Event of Default hereunder shall in any
way be, or be construed to be, a waiver of any future or subsequent Event of
Default.
In addition to its other rights in this Section 19, the Lessor may
exercise its various rights under the Facility Support Agreement or transfer
such rights to the purchaser in a sale and the Lessee acknowledges hereby its
agreement to perform its obligations thereunder.
With respect to the termination of this Lease as to the Facility or any
other Parcel of Property as a result of an Event of Default, the Lessee hereby
waives service of any notice of intention to re-enter. To the extent permitted
by applicable law, the Lessee hereby waives any and all rights to recover or
regain possession of the Facility or any other Parcel of Property or to
reinstate this Lease as permitted or provided by or under any statute, law or
decision now or hereafter in force and effect.
SECTION 20. EQUIPMENT TO BE PERSONAL PROPERTY.
It is the intention and understanding of the Lessor and the Lessee that
all Equipment shall be and at all times remain personal property. The Lessee
shall obtain and record such instruments and take such steps as may be necessary
to prevent any Person from acquiring any rights in Equipment paramount to the
rights of the Lessor by reason of such Equipment being deemed to be real
property.
SECTION 21. SALE OR ASSIGNMENT BY LESSOR.
(a) The Lessor shall have the right to finance the acquisition and
ownership of the Facility or any other Property or Equipment by selling or
assigning its right, title and interest in this Lease, including without
limitation any or all amounts due from the Lessee or any third party under this
Lease and granting a security interest in this Lease, the Facility or any other
Property or Equipment to the Collateral Trustee or, to the extent and for the
purposes permitted hereby to a lender or lenders under a Financing Arrangement;
provided, that any such sale or assignment shall be subject to the rights and
interests of the Lessee under this Lease, and provided further, that any such
sale or assignment or grant of a security interest in this Lease for the benefit
of a Person other than the Collateral Trustee shall be limited to amounts due in
respect of only the Property or Equipment leased to or financed by such Person
(but in no event including any of the Facility or any of the Facility Assets) or
a security interest in such Property or Equipment (other than the Facility or
the Facility Assets).
(b) Any Related Assignee shall, except as otherwise agreed by the Lessor
and such Related Assignee, have all the rights, powers, privileges and remedies
of the Lessor hereunder, and the Lessee's obligations as between itself and such
Related Assignee hereunder shall not be subject to any claims or defense that
the Lessee may have against the Lessor. Upon written notice to the Lessee of any
such assignment, the Lessee shall thereafter make payments of Basic Rent,
Additional Rent and other sums due hereunder in respect of the Facility to the
Collateral Trustee and, in respect of any other Property or Equipment, to the
Related Assignee, to the extent specified in such notice, and such payments
shall discharge the obligation of the Lessee to the Lessor hereunder to the
extent of such payments. Anything contained herein to the contrary
notwithstanding, no Related Assignee shall be obligated to perform any duty,
covenant or condition required to be performed by the Lessor hereunder, and any
such duty, covenant or condition shall be and remain the sole obligation of the
Lessor.
SECTION 22. INCOME TAXES.
Except as may be required in Section 8(i) hereof, the Lessor agrees that
the Lessor will not file any Federal, state or local income, franchise or
similar tax returns during or with respect to the Initial Term, or any Extended
Term or Renewal Term or take any position with respect to any such return (on
audit or otherwise) with respect to the Facility or any other Property or
Equipment that are inconsistent with the treatment of the Lessee as owner of the
Facility or of such other Property or Equipment for Federal, state and local
income tax purposes. The Lessor agrees to covenant in its partnership agreement
that neither the general partner nor the limited partners shall file any
Federal, state or local income tax returns that are inconsistent with the
treatment of the Lessee as owner of the Facility or of such other Property or
Equipment for Federal, state and local income tax purposes. The Lessor further
covenants and agrees that none of its partners will be or become a utility
principally engaged in the business of supplying water, steam, gas or
electricity during the term of this Lease.
SECTION 23. NOTICES AND REQUESTS.
All notices, offers, acceptances, approvals, waivers, requests, demands
and other communications hereunder or under any other instrument, certificate or
other document delivered in connection with the transactions described herein
shall be in writing, shall be addressed as provided below and shall be
considered as properly given (a) if delivered in person, (b) if sent by express
courier service (including, without limitation, Federal Express, Emery, DHL,
Airborne Express, and other similar express delivery services), (c) in the event
overnight delivery services are not readily available, if mailed through the
United States Postal Service, postage prepaid, registered or certified with
return receipt requested, or (d) if sent by telecopy and confirmed; provided
that, in the case of a notice by telecopy, the sender shall in addition confirm
such notice by writing sent in the manner specified in clause (a), (b) or (c) of
this Section 23. All notices shall be effective upon receipt by the addressee;
provided, however, that, if any notice is tendered to an addressee and the
delivery thereof is refused by such addressee, such notice shall be effective
upon such tender. For the purposes of notice, the addresses of the parties shall
be as set forth below; provided, however, that any party shall have the right to
change its address for notice hereunder to any other location by giving written
notice to the other party in the manner set forth herein. The initial addresses
of the parties hereto are as follows:
If to the Lessor:
LIC Funding, Limited Partnership
c/o LIC Capital, Inc.
c/o ML Leasing Equipment Corp.
North Tower
World Financial Center
250 Vesey Street
New York, New York 10281
Attention: Jean M. Tomaselli
Telephone: (212) 449-7925
Telecopy: (212) 449-2854
With a copy of each such notice to be simultaneously given, delivered or served
to Kira Toone at the following address:
ML Leasing Equipment Corp.
Controller's Office
World Financial Center
South Tower - 14th Floor
225 Liberty Street
New York, New York 10080
Attention: Kira Toone
Telephone: (212) 236-7203
Telecopy: (212) 236-7584
If to the Lessee:
KeySpan-Ravenswood, Inc.
c/o KeySpan Corporation
One MetroTech Center
Brooklyn, New York 11201
Attention: General Counsel
Telephone: (718) 403-1000
Telecopy: (718) 696-7139
With a copy of all notices under this Section 23 to each Related Assignee at
such address as such Related Assignee may specify by written notice to the
Lessor and the Lessee.
SECTION 24. COVENANT OF QUIET ENJOYMENT.
During the Initial Term, or any Extended Term or Renewal Term of the
Facility or any other Property or Equipment hereunder and so long as no Event of
Default shall have occurred and be continuing, the Lessor recognizes the
Lessee's right to quiet enjoyment of the Facility and of any other Property or
Equipment on the terms and conditions provided in this Lease without any
interference from the Lessor or anyone claiming through or under the Lessor.
SECTION 25. RIGHT TO PERFORM FOR LESSEE.
(a) If the Lessee fails to perform or comply with any of its covenants
or agreements contained in this Lease, and any period to cure such failure has
expired without the Lessee curing such failure, the Lessor may, upon notice to
the Lessee but without waiving or releasing any obligations or default, itself
perform or comply with such covenant or agreement, and the amount of the
reasonable expenses of the Lessor incurred in connection with such performance
or compliance shall be payable by the Lessee, not later than ten (10) days after
written notice by the Lessor.
(b) Without in any way limiting the obligations of the Lessee hereunder,
the Lessee hereby irrevocably appoints the Lessor as its agent and attorney at
the time at which the Lessee is obligated to deliver possession of the Facility
or any other Parcel of Property or Unit of Equipment to the Lessor, to demand
and take possession of the Facility or such other Parcel of Property or Unit of
Equipment in the name and on behalf of the Lessee from whomsoever shall be at
the time in possession thereof.
SECTION 26. MERGER, CONSOLIDATION OR SALE OF ASSETS, ETC.
The Lessee may not consolidate with or merge into any other corporation
or sell all or substantially all of its assets to any Person, except that the
Lessee may consolidate with or merge into any other corporation which is an
Affiliate of the Lessee, or sell all or substantially all of its assets to any
Person which is an Affiliate of the Lessee; provided, that (a) the surviving
corporation or transferee Person shall assume, by execution and delivery of
instruments satisfactory to the Lessor and the Related Assignee, the obligations
of the Lessee hereunder and become successor to the Lessee, (b) the Lessee shall
not thereby be released from its obligations hereunder, (c) the Guarantor shall
own beneficially and of record greater than fifty percent (50%) of the capital
stock of the surviving corporation or transferee Person, (d) the Guaranty shall
be applicable to the obligations under this Lease with respect to the surviving
corporation or transferee Person, and (e) no Potential Default or Event of
Default shall occur by reason of giving effect to such merger, consolidation or
sale. The terms and provisions of this Lease shall be binding upon and inure to
the benefit of the Lessee and its respective successors and assigns.
SECTION 27. EXPENSES.
The Lessee shall pay all of the reasonable out-of-pocket costs and
expenses incurred by the Lessor and each Related Assignee in connection with the
Operative Documents, the Recordable Documents (upon the occurrence of a
Recording Event) and any amendments, supplements or restatements of any thereof,
including, without limitation, the reasonable fees and disbursements of counsel
to the Lessor and counsel to any Related Assignee.
SECTION 28. PERMITTED CONTESTS.
(a) The Lessee shall not be required, nor shall the Lessor have the
right, to pay, discharge or remove any tax, assessment, levy, fee, rent, charge
or Lien, or to comply or cause the Facility or any other Parcel of Property or
Unit of Equipment to comply with any Legal Requirements or Environmental
Requirements applicable to the Facility or any other Parcel of Property or Unit
of Equipment or the occupancy, use or operation thereof, so long as no Event of
Default or Potential Default exists under this Lease and, in the reasonable
judgment of the Lessee's counsel, the Lessee shall have reasonable grounds to
contest the existence, amount, applicability or validity thereof by appropriate
proceedings, which proceedings in the reasonable judgment of the Lessor and the
Related Assignee, (i) shall not involve any material danger that the Facility or
any other Parcel of Property or Unit of Equipment or any Basic Rent or any
Additional Rent would be subject to sale, forfeiture or loss, as a result of
failure to comply therewith, (ii) shall not affect the payment of any Basic Rent
or any Additional Rent or other sums due and payable hereunder or result in any
such sums being payable to any Person other than the Lessor or any Related
Assignee, (iii) will not place either the Lessor or any Related Assignee in any
danger of civil liability for which the Lessor or Related Assignee is not
adequately indemnified or subject the Lessor or any Related Assignee to any
danger of criminal liability, (iv) if involving taxes, shall suspend the
collection of taxes, and (v) shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which the Lessee or
the Facility or any other Parcel of Property or Unit of Equipment is subject and
shall not constitute a default thereunder (the "Permitted Contest"). The Lessee
shall conduct all Permitted Contests in good faith and with due diligence and
shall promptly after the final determination (including appeals) of any
Permitted Contest pay and discharge all amounts which shall be determined to be
payable therein. The Lessor shall cooperate in good faith with the Lessee with
respect to all Permitted Contests conducted by the Lessee pursuant to this
Section 28.
(b) In the event the Lessor or any Related Assignee deems, in its
reasonable discretion, that its interests under this Lease or in the Facility or
any other Parcel of Property or Unit of Equipment are not adequately protected
in connection with a Permitted Contest brought by the Lessee under this Section
28, the Lessee shall give such reasonable security, as may be demanded by the
Lessor or any Related Assignee, to ensure payment of such tax, assessment, levy,
fee, rent, charge or Lien and compliance with Legal Requirements and to prevent
any sale or forfeiture of the Facility or any other Parcel of Property or Unit
of Equipment, any Basic Rent or any Additional Rent by reason of such nonpayment
or noncompliance. The Lessee hereby agrees that the Lessor may assign such
security provided by the Lessee to the Related Assignee.
(c) At least ten (10) days prior to the commencement of any Permitted
Contest, the Lessee shall notify the Lessor and the Related Assignee in writing
of any such proceeding in which the amount in contest exceeds $3,000,000, and
shall describe such proceeding in reasonable detail. In the event that a taxing
authority or subdivision thereof proposes an additional assessment or levy of
any tax for which the Lessee is obligated to reimburse the Lessor under this
Lease, or in the event that the Lessor is notified of the commencement of an
audit or similar proceeding which could result in such an additional assessment,
then the Lessor shall in a timely manner notify the Lessee and the Related
Assignee in writing of such proposed levy or proceeding.
SECTION 29. LEASEHOLD INTERESTS.
(a) The Lessee hereunder covenants and agrees to perform and to observe
all of the terms, covenants, provisions, conditions and agreements of each
Ground Lease (including the Site Lease) on the Lessor's part as lessee
thereunder to be performed and observed (including, without limitation, payment
of all rent, additional rent and other amounts payable by the Lessor as lessee
under any Ground Lease) to the end that all things shall be done which are
necessary to keep unimpaired the rights of the Lessor as lessee under any Ground
Lease and as grantee with respect to the Easements, and to maintain the
leasehold interest and position of the Lessor with respect to the Facility or
any Parcel of Property. The Lessee further covenants that it shall cause to be
exercised any renewal option contained in the Ground Lease which relates to
renewal occurring in whole or in part during the term of this Lease.
(b) The Lessee covenants and agrees pursuant to Section 11 hereof to
indemnify and hold harmless the Lessor and any Related Assignee from and against
any and all liability, loss, damage, suits, penalties, claims and demands of
every kind and nature (including, without limitation, reasonable attorneys' fees
and expenses) by reason of the Lessee's failure to comply with any Ground Lease,
the Easements or the provisions of this Section 29.
(c) The Lessor and the Lessee agree that the Lessor shall have no
obligation or responsibility to provide services or equipment required to be
provided or repairs or restorations required to be made in accordance with the
provisions of any Ground Lease by the lessee or grantee thereunder. The Lessor
shall in no event be liable to the Lessee nor shall the obligations of the
Lessee hereunder be impaired or the performance thereof excused because of any
failure or delay on the part of the Lessor as the lessee under any Ground Lease
or as grantee with respect to the Easements in providing such services or
equipment or making such restorations or repairs and such failure or delay shall
not constitute a basis for any claim against the Lessor or any offset against
any amount payable to the Lessor under this Lease.
(d) If the Lessor's interest under the Site Lease or any Ground Lease
shall expire, terminate or otherwise be extinguished (including without
limitation by virtue of a rejection of the Site Lease or any Ground Lease in a
bankruptcy proceeding), the lease of the Facility Site or any other Parcel of
Property to which such Ground Lease relates shall thereupon terminate as
provided in this paragraph (d). Upon such expiration, termination or
extinguishment, the Lessee shall be required to purchase the Lessor's interest
in the Facility or such other Parcel of Property at its Acquisition Cost. If the
Lessee shall be required to purchase the Lessor's interest in the Facility or
such other affected Parcel, then (i) on the Basic Rent Payment Date next
succeeding such event, the Lessee shall pay to the Lessor (without duplication)
an amount equal to the Acquisition Cost of the Facility or such other Property,
all Basic Rent accrued through such date, the Debt Yield-Maintenance Premium
payable with respect to the Facility or such other Property and any Additional
Rent and other amounts owing hereunder, (ii) the Lease Term or Renewal Term of
the Facility or such other Property shall continue until the date on which the
Lessor receives payment from the Lessee of the amount payable pursuant to this
paragraph (d) and shall then terminate upon the payment of such amounts and
(iii) the Lessor shall on such date transfer title to the Lessor's interest in
the Facility or such other Parcel to the Lessee.
(e) The Lessee shall ensure that each Ground Lease shall be a
Mortgageable Ground Lease.
SECTION 30. MISCELLANEOUS.
(a) All agreements, indemnities, representations and warranties, and the
obligation to pay Basic Rent, any Debt Yield-Maintenance Premium, Additional
Rent, Acquisition Cost and other amounts contained in this Lease (including
without limitation all amounts payable upon the termination of this Lease) shall
survive the expiration or other termination hereof or the rejection of this
Lease in any bankruptcy proceeding.
(b) This Lease and the Unit Leasing Records covering the Facility and
other Property or Equipment leased pursuant hereto and the instruments,
documents or agreements referred to herein constitute the entire agreement
between the parties and no representations, warranties, promises, guarantees or
agreements, oral or written, express or implied, have been made by any party
hereto with respect to this Lease, the Facility and other Property or Equipment,
except as provided herein or therein.
(c) This Lease may not be amended, modified or terminated, nor may any
obligation hereunder be waived orally, and no such amendment, modification,
termination or waiver shall be effective for any purpose unless it is in
writing, signed by the party against whom enforcement thereof is sought. A
waiver on one occasion shall not be construed to be a waiver with respect to any
other occasion.
(d) The captions in this Lease are for convenience of reference only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof. Any provision of this Lease which is prohibited by law or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and the parties hereto shall negotiate in good
faith appropriate modifications to reflect such changes as may be required by
law, and, as nearly as possible, to produce the same economic, financial and tax
effects as the provision which is prohibited or unenforceable; and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Lessee and the Lessor hereby waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect. THIS LEASE HAS BEEN EXECUTED AND DELIVERED IN THE STATE OF NEW
YORK. THE LESSEE AND THE LESSOR AGREE THAT, TO THE MAXIMUM EXTENT PERMITTED BY
THE LAW OF THE STATE OF NEW YORK, THIS LEASE, AND THE RIGHTS AND DUTIES OF THE
LESSEE AND THE LESSOR HEREUNDER, SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING, WITHOUT
LIMITATION, SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW)
IN ALL RESPECTS, INCLUDING, WITHOUT LIMITATION, IN RESPECT OF ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. THE LESSEE AGREES THAT SERVICE OF
PROCESS MAY BE MADE UPON IT BY CERTIFIED OR REGISTERED MAIL TO THE ADDRESS FOR
NOTICES SET FORTH IN THIS LEASE OR ANY METHOD AUTHORIZED BY THE LAWS OF NEW
YORK. THE LESSOR AND THE LESSEE EXPRESSLY WAIVE ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM RELATED TO THIS LEASE OR THE TRANSACTIONS
CONTEMPLATED HEREBY. THE LESSOR AND THE LESSEE ACKNOWLEDGE THAT THE PROVISIONS
OF THIS PARAGRAPH (D) OF SECTION 30 HAVE BEEN BARGAINED FOR AND THAT THEY HAVE
BEEN REPRESENTED BY COUNSEL IN CONNECTION THEREWITH.
(e) In connection with any sale of the Facility, any Property or
Equipment or any Turbine Unit pursuant to Section 12, 13, 14, 15, 19 or 29 of
this Lease, when the Lessor transfers title, such transfer shall be on an as-is,
non-installment sale basis, without warranty by, or recourse to, the Lessor
other than that the Lessor is transferring title free of any Lien created
pursuant to any Financing Arrangement.
(f) In connection with the sale or purchase of the Facility, any
Property or Equipment or any Turbine Unit pursuant to Section 12, 13, 14, 15, 19
or 29, the Lessee shall pay or shall cause the purchaser thereof to pay in
addition to the purchase price, all transfer taxes, transfer gains taxes,
mortgage recording tax, if any, recording and filing fees and all other similar
taxes, fees, expenses and closing costs (including reasonable attorneys' fees)
in connection with the conveyance of the Facility or such other Property or
Equipment or Turbine Unit to the Lessee or any purchaser.
(g) In connection with the purchase of the Facility, any Property or
Equipment or any Turbine Unit by the Lessee or any third party pursuant to the
provisions of this Lease, the Lessor shall deliver to the Lessee or such third
party, as the case may be, a bill of sale, deed or similar document assigning
and conveying to the Lessee or such third party, as the case may be, and the
Lessee or such third party, as the case may be, shall accept an assignment of,
the Lessor's interest in the Site Lease, the Easements, and, if applicable, any
other Ground Lease or other documents to be without warranty by, or recourse to,
the Lessor, but free of the Lien created pursuant to any Financing Arrangement
(provided that the purchase price paid by the Lessee to the Lessor, exclusive of
the other amounts payable hereunder in connection with such purchase, shall
equal the Acquisition Cost of the Facility or such Property, Equipment or
Turbine Unit).
(h) Each time that the Acquisition Cost of the Facility or any other
Property or Equipment is decreased pursuant to the terms of this Lease, the
Lessor shall promptly revise the applicable Unit Leasing Record to reflect such
decrease and shall provide the Lessee and the Related Assignee with a copy of
such revised Unit Leasing Record.
SECTION 31. NO RECOURSE.
The Lessor's obligations hereunder are intended to be the obligations of
the limited partnership and of the corporation which is the general partner
thereof only and no recourse for the payment of any amount due under this Lease,
any Ground Lease, the Site Lease or any other agreement contemplated hereby, or
for any claim based hereon or thereon or otherwise in respect thereof, shall be
had against any limited partner of the Lessor or any incorporator, shareholder,
officer, director or Affiliate, as such, past, present or future of such
corporate general partner or of any corporate limited partner or of any
successor corporation to such corporate general partner or to any corporate
limited partner of the Lessor, or against any direct or indirect parent
corporation of such corporate general partner or of any limited partner of the
Lessor or any other subsidiary or Affiliate of any such direct or indirect
parent corporation or any incorporator, shareholder, officer or director, as
such, past, present or future, of any such parent or other subsidiary or
Affiliate. Nothing contained in this Section 31 shall be construed to limit the
exercise or enforcement, in accordance with the terms of this Lease and any
other documents referred to herein, of rights and remedies against the limited
partnership or the corporate general partner of the Lessor or the assets of the
limited partnership or the corporate general partner of the Lessor.
SECTION 32. NO MERGER.
There shall be no merger of this Lease or of the leasehold estate hereby
created with the fee estate or any other interest in the Facility or in any
other Parcel of Property or any portion thereof by reason of the fact that the
same person acquires or holds, directly or indirectly, this Lease or the
leasehold estate hereby created or any interest herein or in such leasehold
estate as well as the fee estate in the Facility or in any other Parcel of
Property or any interest in such fee estate.
IN WITNESS WHEREOF, the Lessor and the Lessee have caused this Lease to
be executed and delivered by their duly authorized officers as of the day and
year first above written.
LIC Funding, Limited Partnership
By LIC Capital, Inc.,
its General Partner
By __________________________
Name:
Title:
KeySpan-Ravenswood, Inc.
By __________________________
Name:
Title:
CONFIDENTIAL AND PROPRIETARY
LEASE AGREEMENT
Dated as of June 9, 1999
LIC Funding, Limited Partnership
as Lessor
AND
KeySpan-Ravenswood, Inc.
as Lessee
THIS LEASE MAY BE ASSIGNED AS SECURITY
FOR INDEBTEDNESS OF THE LESSOR. SEE SECTION 21.
This Lease has been manually executed in 40 counterparts, numbered consecutively
from 1 through 40 of which this is No. _____. To the extent, if any, that this
Lease constitutes chattel paper (as such term is defined in the Uniform
Commercial Code as in effect in any applicable jurisdiction), no security
interest in this Lease may be created or perfected through the transfer or
possession of any counterpart other than the original executed counterpart which
shall be the counterpart identified as counterpart No. 1.
TABLE OF CONTENTS
SECTION 1 DEFINED TERMS................................................1
SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LESSEE. 19
SECTION 3. LEASE OF THE FACILITY AND OTHER PROPERTY
AND EQUIPMENT...............................................30
SECTION 4. INTENT OF THE PARTIES; OPERATING LEASE......................31
SECTION 5. DELIVERY; ABSOLUTE OBLIGATION...............................32
SECTION 6. INITIAL TERM; EXTENDED TERM.................................36
SECTION 7. RENT AND OTHER PAYMENTS.....................................37
SECTION 8. RESTRICTED USE; COMPLIANCE WITH LAWS, FURTHER
ASSURANCES..................................................38
SECTION 9. MAINTENANCE, IMPROVEMENT AND REPAIR OF THE
FACILITY, PROPERTY OR EQUIPMENT.............................43
SECTION 10. INSURANCE...................................................46
SECTION 11. INDEMNITIES.................................................52
SECTION 12. [CONFIDENTIAL TREATMENT]....................................56
SECTION 13. LESSEE'S RIGHTS OF PURCHASE AND RENEWAL.....................59
SECTION 14. TERMINATION UPON CERTAIN EVENTS.............................62
SECTION 15. LOSS OF OR DAMAGE TO PROPERTY OR EQUIPMENT..................64
SECTION 16. CONDEMNATION AND DEDICATION OF THE FACILITY AND
PROPERTY; EASEMENTS.........................................65
SECTION 17. SURRENDER OF PROPERTY OR EQUIPMENT..........................66
SECTION 18. EVENTS OF DEFAULT...........................................67
SECTION 19. RIGHTS UPON DEFAULT.........................................69
SECTION 20. EQUIPMENT TO BE PERSONAL PROPERTY...........................73
SECTION 21. SALE OR ASSIGNMENT BY LESSOR................................73
SECTION 22. INCOME TAXES................................................74
SECTION 23. NOTICES AND REQUESTS........................................74
SECTION 24. COVENANT OF QUIET ENJOYMENT.................................75
SECTION 25. RIGHT TO PERFORM FOR LESSEE.................................76
SECTION 26. MERGER, CONSOLIDATION OR SALE OF ASSETS, ETC................76
SECTION 27. EXPENSES....................................................76
SECTION 28. PERMITTED CONTESTS..........................................77
SECTION 29. LEASEHOLD INTERESTS.........................................78
SECTION 30. MISCELLANEOUS...............................................79
SECTION 31. NO RECOURSE.................................................80
SECTION 32. NO MERGER...................................................81